We expect restaurant company
Cheesecake Factory Inc.
) to beat earnings expectations when it reports first-quarter
2013 results on Apr 24. In the trailing four quarters, the
restaurateur posted an average earnings surprise of 2.37%. Let's
see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Cheesecake has the right
combination of two key ingredients to beat earnings.
Positive Zacks ESP:
The Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for Cheesecake is +2.38%. This indicates the difference between
the Most Accurate estimate, which stands at 43 cents per share
and the Zacks Consensus Estimate of 42 cents per share. This is
very meaningful and a leading indicator of a likely positive
earnings surprise for shares.
Zacks Rank #3 (Hold):
The combination of Cheesecake's Zacks Rank #3 (Hold) when
combined with a positive Earnings ESP of +2.38% makes us
confident of a positive earnings surprise in the soon-to-be
Note that stocks with Zacks Ranks of #1, 2 and 3 have a
significantly higher chance of beating earnings. The Sell rated
stocks (#4 and 5) should never be considered going into an
Drivers of Better-than-Expected Earnings
We expect Cheesecake to beat earnings in first-quarter 2013
gaining from strong operational performance of the three new
restaurants in the Middle East, which have been registering
higher-than-expected volume growth and are likely to contribute
nicely to 2013 margins.
Relatively benign food costs, planned efficiency gain and a
benefit from bakery mix shift will likely augur well for cost of
sales, which in turn should facilitate margin expansion.
Further, the company boasts sufficient free cash flow and
expects to use most of it for dividend payments and share
repurchases. This share repurchase activity also might help
earnings per share in the quarter.
Other Stocks to Consider
Cheesecake is not the only stock expected to post impressive
results this earnings season. We also observe that there are
other companies in the leisure sector, which are likely to beat
Hyatt Hotels Corporation
) Earnings ESP of +37.50% and a Zacks Rank #3 (Hold).
Marriott International Inc.
) Earnings ESP of +4.88% and a Zacks Rank #3 (Hold).
Wynn Resorts Ltd.
) Earnings ESP of +3.87% and a Zacks Rank #3 (Hold).
CHEESECAKE FACT (CAKE): Free Stock Analysis
HYATT HOTELS CP (H): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
WYNN RESRTS LTD (WYNN): Free Stock Analysis
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