I am a big fan of the Cheesecake Factory (CAKE), and especially their Grand Lux division.
Their portions are enormous and the selection is quite impressive; it is definitely one of my favorites for the price range.
However, this is a classic case of a good product not necessarily translating over into an excellent stock investment. This is especially apparent if you look to not only the company’s recent performance—including its last earnings report which missed estimates—but also the latest changes to the estimate picture from covering analysts.
Recent Estimates
In fact, we have seen eight estimates go lower for the current quarter in the past sixty days compared to zero higher, while we have seen similar trends for the full year and next year time frames as well. The next year estimates are especially notable on this front, as we have seen ten estimates go lower compared to zero higher for the time frame, suggesting long-term weakness could be at play here.
And it isn’t as though analysts are just cutting estimates by a penny either, as we have seen a noticeable shift lower to the consensus estimate in the past two months. The current quarter consensus has fallen by over 11% in the past sixty days, while the current year consensus has slumped by over five percent in the same time frame.
The most recent estimates have been even worse, potentially pushing the consensus estimate even lower in the process. In fact, the earnings ESP for CAKE is -6.6% for the current quarter, and it is in negative territory for the current year and next year readings too.
The Cheesecake Factory Incorporated Price and Consensus
The Cheesecake Factory Incorporated Price and Consensus | The Cheesecake Factory Incorporated Quote
Add that to a brutal trend in CAKE shares and the overall restaurant industry—including a bottom 25% rank for the space—and you don’t have a recipe for success. No wonder shares of CAKE have fallen into ‘Strong Sell’ territory, and why we are looking for more underperformance from this name in the future.
Other Choices
If you want to stay in the restaurant industry, good choices are few and far between. However, there are a few that could be worth putting on your radar these days, including McDonald’s (MCD).
McDonald’s actually has a Zacks Rank #2 (Buy), and it has seen rising earnings estimates too. Add that to a great fundamental score, and this could be worth investigating over CAKE, at least until the Cheesecake Factory can turn its earnings estimate picture around.