Paul Price

Get Your Just Desserts by Selling Cheesecake Factory Puts

Cheesecake Factory profit beats Street
Thu Oct 22, 2009 4:54pm EDT

LOS ANGELES, Oct 22 (Reuters) - Cheesecake Factory Inc’s (CAKE) quarterly profit beat Wall Street’s view, as cost controls and lower food prices helped shelter earnings from falling sales at established restaurants, sending shares up 2.7 percent.

The restaurant company, known for its big portions and extensive menus, said on Thursday third-quarter net income was $16.3 million, or 27 cents per share, up from $11.8 million million, or 19 cents per share, a year earlier.

Excluding charges, the company had a profit of 29 cents per share in the most recent quarter, beating analysts’ average estimate by 5 cents, according to Thomson Reuters I/B/E/S.

Total revenue fell 1.1 percent to $400.6 million. Overall sales at restaurants open at least 18 months fell 2.8 percent, on a 2.4 percent drop at Cheesecake Factory restaurants and a 6 percent drop at the smaller Grand Lux chain.

Shares of Cheesecake Factory rose to $18.63 in extended trading after closing at $18.14 on the Nasdaq.

Get Your Just Desserts by Selling Cheesecake Factory Puts

Yes, sorry for the typo. It should read 2001 & 2012.

Cheesecake Factory: Why Piper Jaffray's Downgrade Was Baseless

Marc,

I agree with you that Cheescake Factory looks like a great value at current prices. With virtually no debt and the ability to make profits in this dreadful climate they look like a good bet for a major gain from the single digits.

What I don't understand is how you could have held continuously from 1997. CAKE shares got close to $40 a few years ago and were clearly overpriced even on, what was then, good news.

You need to sell even the best run companies when the valuation gets excessive.

The Cheesecake Factory: Have Your Cake and Eat It Too

I liked it then and I'm buying more now.

The Cheesecake Factory: Have Your Cake and Eat It Too

If you understood my posting you'd see that the combination play works even if the shares stay flat or even go down a bit.

That cushion negates much of the 'headwinds' and , in my view, the extremely low valuation of the company more than offsets any macro-economic negatives.

You are free to disagree. Don't buy if you think something else looks better.

I rarely, if ever, buy options. I want time decay to be working for me, not against me.

The Cheesecake Factory: Have Your Cake and Eat It Too

At the current valuation CAKE has significant upside and little downside.

The combo described reduces the break-even point even more.
If you don't like it, buy something else.

The Cheesecake Factory: Have Your Cake and Eat It Too

You can only invest going forward.

I love this stock from today's price point.

Casual Dining Sector Offers Up Compelling Plays Like Ruby Tuesday

At 22 years old I didn't pay enough attention to balance sheets either.

Age and experience are great teachers.

After 30 years of doing this I find excessive corporate debt [especially in a credit strapped economy] can be a deal-buster.

Casual Dining Sector Offers Up Compelling Plays Like Ruby Tuesday

Ruby Tuesday may recover and go on to big gains if everyting goes well. However they had violated their debt covenents and had to get waivers from lenders recently to avoid bankruptcy. Unless things get better quickly this is still a big risk.

Your contention that they were able to increase earnings during the bad times is just flat-out wrong. They had a terrible year and have not yet shown signs of a turnaround in EPS.

They cut back drastically on their new unit openings to conserve cash in this very bad environment for their industry.

I like out-of-favor stocks in unpopular industries like this.

I'd rather stick to the clear survivors like CAKE< CBRL< EAT<DRI<RUTH<... then take a shot on Ruby Tuesday where the penalty for failure is death rather than just delayed recovery.