Argus Upgrades Shareholder-Friendly Cheesecake Factory To A Buy

Cheesecake Factory Inc CAKE reported year-over-year same-store-sales growth for the 27th consecutive quarter. Shares could attract investors going forward “given the company’s record of dividend hikes and share repurchases, and ability to open new stores while also generating consistent comp growth,” Argus’ John Staszak said in a report.

Staszak upgraded the rating on Cheesecake Factory from Hold to Buy while establishing a price target of $69.

Exhibiting Consistent Growth

Cheesecake Factory reported its Q3 adjusted EPS at $0.70, significantly ahead of its guidance, Argus’ estimate of $0.64 and the consensus forecast of $0.61. Same-store-sales growth came in at 1.7 percent, representing 27 straight quarters of positive comps, while also topping the consensus estimate of 0.8 percent.

The company has been generating consistent same-store sales growth in the low single digits, Staszak noted. Management guided to EPS of $2.95–$3.11 for FY 2017, with 1–2 percent growth in same-store sales.

Buybacks And Dividend Hikes

Cheesecake Factory raised its quarterly dividend by 20 percent to $0.24, or $0.96 per annum, in July 2016. This represents a yield of about 1.6 percent. The analyst projected dividend of $0.88 for 2016 and $1.12 for 2017.

“Shares outstanding fell from 50.6 million to 49.2 million [in Q3]. Going forward, we expect management’s aggressive share repurchases to reduce the share count by up to 6 percent,” Staszak added.