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Why The Cheesecake Factory Is Trading near Its 52-Week Low

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Aug. 31 2017, Published 10:17 a.m. ET

Stock performance

On August 30, 2017, The Cheesecake Factory (CAKE) hit a new 52-week low of $40.22. However, the company closed the day at $40.87, which represents a fall of 13.3% since the announcement of its 2Q17 earnings on August 2, 2017.

The Cheesecake Factory posted an adjusted EPS (earnings per share) of $0.78 on revenues of $569.9 million in 2Q17. Analysts expected the company to post EPS of $0.76 on revenues of $570.3 million. The company’s SSSG (same-store sales growth) fell 0.5%. After posting weak 2Q17 SSSG, the company’s management lowered its 2017 SSSG guidance to -1%—compared to its previous guidance of 1%–2%. The Cheesecake Factory lowered its EPS guidance to $2.62–$2.70 from its earlier guidance of $2.93–$3.02. The lower EPS and SSSG guidance seem to have made investors skeptical about The Cheesecake Factory’s future earnings, which led to a fall in its stock price.

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YTD performance

So far, 2017 continues to be a tough year for The Cheesecake Factory. Its stock has fallen 31.7% since the beginning of 2017. During the same period, Texas Roadhouse (TXRH), Brinker International (EAT), and Buffalo Wild Wings’ (BWLD) stock prices have fallen 2.9%, 36.3%, and 34.0%, respectively.

The S&P Index 500 (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY) have returned 9.8% and 9.6%, respectively, YTD (year-to-date). XLY has invested 12.7% of its holdings in restaurants and travel companies.

Outlook

In this series, we’ll look at analysts’ revenue and EPS estimates for the next four quarters. We’ll also cover The Cheesecake Factory’s valuation multiple and analysts’ recommendations.

In the next part, we’ll look at analysts’ revenue estimates.

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