Bull of the Day: The Cheesecake Factory (CAKE)

The market has been on quite the run this year. When stocks are flying around like this, it can be tempting to throw money at anything with a pulse. But eventually, earnings matter. They always do. That’s why I like leaning on the Zacks Rank to uncover stocks where analysts are doing exactly what you want them to do. That’s raising their earnings estimates.

That brings us to today’s Bull of the Day, The Cheesecake Factory (CAKE). The company operates a diverse restaurant portfolio led by its namesake Cheesecake Factory restaurants, along with North Italia, Flower Child and a collection of concepts under Fox Restaurant Concepts. This isn't just about giant slices of cheesecake anymore. CAKE has built itself into a legitimate multi-brand restaurant growth story.

More importantly, the earnings are backing it up.

The Cheesecake Factory absolutely crushed expectations in the second quarter. Revenue increased 7.7% year over year to $1.03 billion, beating the Zacks Consensus Estimate by more than 3%. Adjusted earnings came in at $1.44 per share versus expectations for $1.17. That's a 23% earnings surprise and a big jump from $1.16 per share during the same quarter last year.

The Cheesecake Factory Incorporated Price and Consensus

The Cheesecake Factory Incorporated price-consensus-chart | The Cheesecake Factory Incorporated Quote

That report got Wall Street's attention.

Over the last 60 days, 10 analysts have increased their earnings estimates for the current year with none moving lower. The bullish moves pushed the Zacks Consensus Estimate from $4.01 to $4.47 per share. Ten analysts have also increased their estimates for next year without a single downward revision. That's exactly the sort of earnings estimate momentum we want to see.

That's the reason CAKE has recently earned itself a Zacks Rank #1 (Strong Buy). Current-year earnings growth is forecast at 18.5%. Next year's consensus calls for earnings around $4.96 per share, representing another double-digit increase. Revenue isn't sitting still either, with current-year sales growth expected around 6.8% followed by another 6.77% next year. In a world where some restaurants are struggling to make a profit, the company is taking the cake.

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This article originally published on Zacks Investment Research (zacks.com).

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