The Cheesecake Factory Incorporated Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

The Cheesecake Factory Incorporated (NASDAQ:CAKE) shareholders are probably feeling a little disappointed, since its shares fell 6.1% to US$35.10 in the week after its latest second-quarter results. Cheesecake Factory reported US$904m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.08 beat expectations, being 6.8% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Cheesecake Factory

After the latest results, the 17 analysts covering Cheesecake Factory are now predicting revenues of US$3.58b in 2024. If met, this would reflect a credible 2.3% improvement in revenue compared to the last 12 months. Per-share earnings are expected to soar 39% to US$3.18. Before this earnings report, the analysts had been forecasting revenues of US$3.60b and earnings per share (EPS) of US$3.15 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$40.69. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Cheesecake Factory at US$50.00 per share, while the most bearish prices it at US$29.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cheesecake Factory's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Cheesecake Factory's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.6% growth on an annualised basis. This is compared to a historical growth rate of 11% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 9.7% annually. Factoring in the forecast slowdown in growth, it seems obvious that Cheesecake Factory is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Cheesecake Factory analysts - going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Cheesecake Factory you should be aware of, and 1 of them is a bit concerning.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com