Yahoo Finance BJRI or CAKE: Which is a More Appetizing Restaurant Stock?
The restaurant industry faces a myriad of challenges as it moves into 2024. Global consumer pressures and elevated day-to-day spending have significantly affected the quick-service restaurant sector. With consumers becoming more discerning with their dollars, the industry feels the strain of higher operational costs and fluctuating demand.
In major markets such as the United States, Australia, Canada, Germany, Japan and the UK, industry restaurant traffic has been flat to declining. Economic volatility in the Middle East continues to pose challenges. In China, the recovery has been slower than expected amid fierce competition from value players. Additionally, temporary disruptions like severe weather in some regions have further complicated the landscape.
Despite these hurdles, the restaurant industry's resilience and strategic planning highlight a promising future. Industry players are emphasizing on comprehensive consumer insights and marketing campaigns that deeply connect their respective brands to cultural trends. By leveraging core menu strengths and building a loyalty base, the industry has positioned itself for sustained success.
Operators are increasingly adopting technology to tackle challenges, reduce labor costs and enhance business operations, from marketing to inventory management. Efforts to enhance operational efficiency are also gaining momentum. In the United States, (in the morning daypart) businesses have faced issues with incomplete mobile orders due to long wait times and product availability. By improving throughput, optimizing store processes and rolling out new equipment, the industry aims to improve customer experience and capture the existing demand more effectively.
Looking ahead, the restaurant industry's strategic approach, combined with its ability to adapt to changing consumer behaviours and market conditions, underscores its resilience. Despite the challenges, there are numerous positive indicators. Long-term growth prospects in the Middle East remain promising, and in China, efforts to strengthen premium positions and maintain rigorous execution by local teams are starting to pay off.
Per the NRA, sales in the restaurant and food service industry are projected to exceed $1 trillion for the first time in 2024. The industry is on track to add 200,000 jobs, pushing its total employment to 15.7 million.
Leading restaurant companies like BJ's Restaurants, Inc. BJRI, The Cheesecake Factory Incorporated CAKE, Brinker International, Inc. EAT and Wingstop Inc. WING have been adopting and deploying strategies to generate profits.
In this blog, we run a comparative analysis on BJ’s Restaurants and Cheesecake Factory — both carrying a Zacks Rank #3 (Hold) at present — to decide which stock is poised better with respect to different parameters.
Zacks Consensus Estimate & Stock Performance
The Zacks Consensus Estimate for BJ's Restaurants’ 2024 earnings per share (EPS) indicates a 65.9% year-over-year rise. Cheesecake Factory’s bottom line for 2024 is likely to increase 17.5% year over year. CAKE has a better revenue growth expectation of 4.9% versus BJRI’s 1%.
Both BJRI and CAKE’s earnings estimates have moved up in the past 60 days. Both stocks flaunt a Value Score of A.
Shares of BJ's Restaurants and Cheesecake Factory have risen 19.2% and 10.1%, respectively, in the past six months against the industry’s 4.2% decline.
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The overall picture is encouraging, with CAKE having performed better than BJRI and the industry as a whole.
Meanwhile, BJ's Restaurants and Cheesecake Factory beat on earnings in three of the trailing four quarters and missed once. BJRI has a negative earnings surprise of 326.1%, while CAKE has a positive earnings surprise of 6.4%.
Fundamentals
BJ’s Restaurants’ extensive focus on refining and streamlining its menu is the key driver for improved traffic. Its menu and pricing strategy includes daily Brewhouse Specials, like Slow-Roasted Thursdays, offering great value to guests. The company's expansion endeavors have also proven fruitful, with a balanced approach to opening new establishments while prioritizing optimal shareholder returns. In the first quarter of fiscal 2024, BJ’s Restaurants opened a new establishment in Brookfield, WI, receiving positive feedback. With plans to unveil three additional restaurants in fiscal 2024, the company remains steadfast in its goal to expand its domestic footprint to more than 425 locations.
BJRI is actively pursuing remodeling projects to drive sales, leveraging insights gathered from past remodels to anticipate increased foot traffic and sales. Additionally, the company is investing heavily in technology-driven initiatives like digital ordering, utilizing its app and digital platforms to efficiently offer promotions, digital check-ins, menus and payment options, while witnessing steady growth in its loyalty guest database.
Cheesecake Factory's growth strategy revolves around Flower Child restaurants, which experienced strong comparable sales and demand trends in the fiscal first quarter. The company implemented various operational and supply-chain enhancements in the past 18 months to improve guest experience and drive cost efficiencies. These include introducing a kitchen display system and upgrading the loyalty platform. Flower Child sales increased 10.2% year over year, signaling promising growth prospects due to strong consumer demand and solid infrastructure support.
Moreover, Cheesecake Factory is focusing on expanding its rewards program, witnessing increased member activity and engagement levels. The company is conducting tests on acquisition strategies and activation campaigns to enhance membership enrollment and drive frequency. Additionally, it is committed to development efforts, opening new restaurants internationally and planning to open another 22 in fiscal 2024, including Cheesecake Factory, North Italia and Flower Child locations. The emphasis on differentiated concepts like Culinary Dropout and Blanco, along with market tests for potential growth concepts, underscores the company's dedication to driving growth in its portfolio of Full Service Restaurants.
A Look at the Stocks’ Profitability & Valuation
Return on Equity in the trailing 12 months for Cheesecake Factory is 42.2% compared with BJ's Restaurants and the industry’s 6.5% and 4.8%, respectively. This implies that CAKE provides more impressive returns to investors than BJRI and the collective industry.
Cheesecake Factory has a 12-month forward P/E ratio of 11.83 compared with the industry’s 22.27. BJRI has a 12-month forward P/E ratio of 23.55. Here, CAKE is the clear winner as it is less pricey than BJRI.
Our Take
Our comparative analysis shows that Cheesecake Factory has an edge over BJ’s Restaurants in terms of share price appreciation and returns to investors. Yet, BJRI provides an impressive EPS growth rate. The fundamentals of both companies look solid. Taking all the factors into account, we believe that Cheesecake Factory is better positioned than BJ’s Restaurants at the moment.
A Brief Overview of the Other Two Stocks
Wingstop is benefiting from delivery channel expansion, menu innovation and digital marketing initiatives. Also, focus on supply-chain strategy and robust unit economics are adding to the positives. Going forward, the company is likely to focus on technological advancements to drive growth. This Zacks Rank #1 (Strong Buy) company intends to roll out its proprietary tech stack, My Wingstop, to digitize transactions and enhance personalization for guests. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has a trailing four-quarter earnings surprise of 21.4%, on average. The consensus estimate for its 2024 sales and EPS indicates a rise of 27.5% and 36.7%, respectively, from the prior-year reported levels.
Brinker is benefiting from increased menu pricing, effective marketing strategies and traffic-driving initiatives. Also, focus on menu adjustments bodes well. The company intends to focus on balancing value offerings with margin expansion and adaptability to changing consumer preferences to drive growth. For the coming year, EAT is expected to look for more ways to offer convenience, value, and a great guest experience, including doubling its pipeline of new restaurant openings and expanding its portfolio of brands. Also, its focus on digitalization and remodeling initiatives bodes well.
The Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 213.4%, on average. The consensus estimate for its 2024 sales and EPS implies growth of 5.1% and 41.3%, respectively, from the prior-year reported levels.
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BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report
The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
