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How Cheesecake Factory Came Out Ahead in 1Q16 EPS Growth

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EPS growth

In the previous part of the series, we looked at revenue growth and EBIT (earnings before interest and tax) margins for our five casual dining restaurant companies. Now let’s look at their EPS (earnings per share) growth. In 1Q16, these companies registered median EPS growth of 8.7%.

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The leaders

With EPS growth of 21.4%, The Cheesecake Factory (CAKE) beat our other four companies in 1Q16. EPS growth was driven mainly by share repurchases of more than $100 million in the last 12 months. Share repurchases reduce the number of shares outstanding, thus increasing the company’s EPS. Revenue growth and the rise in EBIT margin also contributed to CAKE’s EPS growth.

CAKE is followed by Buffalo Wild Wings (BWLD) with EPS growth of 13.8%. Revenue growth of 15.4% has driven BWLD’s EPS.

Texas Roadhouse (TXRH), which followed BWLD, had EPS growth of 12.1%. The increase in revenue and share repurchases worth $27.4 million drove TXRH’s EPS.

The laggards

A decline in revenue and margins due to sales deleverage and a rise in labor expenses brought Bloomin’ Brands’ (BLMN) EPS down 13%.

BLMN was followed by Brinker International (EAT). Although EAT repurchased shares worth $266.2 million, the company’s EPS increased by just 5.3% in 1Q16. EAT forms 0.19% of the holdings of the iShares S&P Mid-Cap 400 Value (IJJ).

In the next part, we’ll look at the valuation multiples for our five casual dining companies.

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