Panera Bread (PNRA) Q2 Earnings, Revenues Top Estimates

Panera Bread Company (NASDAQ:PNRA) posted strong second-quarter 2016 results with both earnings and revenues beating the Zacks Consensus Estimate.

Earnings and Revenue Discussion

Panera Bread’s second-quarter earnings of $1.78 beat the Zacks Consensus Estimate of $1.75 by 1.7%. Further, EPS increased 10.6% year over year mainly on the back of higher revenues and lower share count.

Revenues of $698.9 million went up 3.3% year over year mainly on the back of higher bakery-café sales, fresh dough and other product sales to franchisees and increased franchise royalties and fees. Further, revenues beat the consensus mark of $698 million by 0.1%.

Comps Discussion

System-wide comparable net bakery-café sales increased 2.3%, lower than 4.7% growth recorded last quarter. Comps at company-owned units grew 4.2%, lower than the 6.2% rise posted in the first quarter. Comps at company-owned units reflect 3.8% average check growth and 0.4% year-over-year increase in transaction.

Panera Bread witnessed 0.6% comps growth at franchisee-operated units that compared unfavorably with 3.3% rise in the previous quarter.

Additionally, the company declared that comps in the first 27 days of the third quarter of 2016 increased 3.1%, indicating that it is off to a strong start in the ongoing quarter.

Margins

Panera Bread’s adjusted operating margin (excluding charges related to its refranchising initiatives) declined 50 basis points (bps) from the year-ago quarter. This was primarily due to higher wages as well as start-up and transition expenses associated with the company’s strategic initiatives. Further, a year-over-year increase in general and administrative expenses and higher incentive compensation led to the decline.

2016 Outlook

The company raised the lower end of its previously issued fiscal 2016 EPS guidance. Excluding certain items, adjusted earnings are projected in the band of $6.60 to $6.70 compared with $6.50 to $6.70 expected previously. The new guidance represents growth of 6% to 8% as compared to 5% to 8% estimated earlier.

Meanwhile, Panera Bread reiterated its company-owned comparable net bakery-café sales growth expectation at the range of 4% to 5%.

For operating margins, the company continues to expect a decline of 50 bps to 100 bps year over year, excluding the impact of certain items.

Zacks Rank & Stocks to Consider

Panera Bread has a Zacks Rank #3 (Hold). Better-ranked restaurant stocks are Jack in the Box Inc. (NASDAQ:JACK) , Famous Dave's of America Inc. (NASDAQ:DAVE) and Papa John's International Inc. (NASDAQ:PZZA) . All the three stocks carry a Zacks Rank #2 (Buy).

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