Let Them Eat CAKE: Cheesecake Factory Moves Forward with International Expansion
Though The Cheesecake Factory (CAKE) has been plateauing recently after a strong 5-year increase of 129%, Seeking Alpha has ranked the chain’s stock a buy. This recommendation is primarily due to plans for extensive global expansion.
The chain has licensing agreements with Hong Kong-based Maxim Caterers Ltd. to open at least 14 restaurants in Hong Kong, Taiwan, Macau and PR China, the first of which will be open by fiscal 2015. It also holds licenses to open 24 locations in the Middle East and 12 in Latin America for a total of 50 global openings. EPS for The Cheesecake Factory is currently at $2.15 – each location is expected to add at least $0.01 to EPS, boosting it at least 23% in the next few years.
Other analysts are remaining relatively neutral following The Cheesecake Factory’s Q2 report, when earnings of $0.59 per share missed analysts’ expectations of $0.609 by just 3%. Of the 26 analysts covering the stock, 14 rate it a Hold and 11 recommend it as a Buy. The average target price is currently $48, which suggests a 10.5% growth potential over the next 12 months. The Factory also conducts regular stock buybacks, and recently raised its dividend by 18%.
The Crab Is Cracking: Joe’s Crab Shack Gets Cooked in Q2, Ignite Restaurant Group’s Stock Gets Extinguished
Ignite Restaurant Group (IRG) shares dropped 33% Friday after a Q2 earnings release and a subsequent downgrade by Raymond James. Total revenues were $229.8 million, almost identical to the $228.1 million IRG earned in the same quarter of last year. However, the reported $0.08 EPS missed analyst expectations of $0.24 by 67%. Cannibalization of Joe’s Crab Shack sales took much of the blame in the report, which dropped 4.7% over the quarter.
To remedy the losses, IRG is refocusing on expanding its Brick House Tavern + Tap chain, which reported sales increases of 8.5%. Currently the corporation operates just 20 Brick House locations, compared to 174 Romano’s Macaroni Grills and 136 Joe’s Crab Shacks. CEO Ray Blanchette acknowledged the painful losses, but confirmed to shareholders that the company intends to “focus on a robust pipeline of initiatives to drive sales growth and improve profitability.”
BJ’s Doesn’t Blow
BJ’s Restaurant Inc. (BJRI) has seen a lot of insider trading lately, the restaurant chain corporation has received a Buy reiteration from Stifel Nicolaus and passed analyst expectations in its latest July 24 earnings report. EPS came in at $0.30, and BJ’s is expected to post $0.77 EPS for the current fiscal year.
The chain operates 150 “casual dining” locations across the country, and while a Black and Bleu Cheeseburger will leave you with more than a full day’s worth of sodium and almost twice the recommended saturated fat, stock has been healthy with a year-to-date increase of 13.8%.
It currently sports a Zacks Rank #1 (Strong Buy), and that YTD increase blows past the industry average of 5.8%. Keep an eye on BJ’s – its valuation has been tied to aggressive expansion plans, but fulfillment of those plans depend on organic sales growth and demand for new locations.