Cheesecake Factory Posts Modest 3Q Results, but High Food Costs Still Linger

Cheesecake Factory CAKE delivered modest top-line results in its third quarter, but net income fell from the previous year, largely due to heightened food costs. We plan to maintain our fair value estimate of $27 per share, and we view shares as fairly valued at current prices. However, we remain concerned that a correction among restaurant stocks may occur as macroeconomic pressures and menu price increases from earlier in the year weigh on traffic industrywide. That said, a pullback could create an opportunistic entry point for this quality restaurant operator, which continues to deliver industry-leading unit productivity metrics despite elevated food costs.