We expect Panera Bread Company (NASDAQ:PNRA) to beat earnings when it reports first-quarter 2016 results on Apr 26. Last quarter, the company posted a positive earnings surprise of 5.6% owing to higher revenues.
The casual dining restaurant chain surpassed earnings estimates in two of the last four quarters with an average surprise of 0.77%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Panera Bread Company is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate ($1.52 per share) and the Zacks Consensus Estimate ($1.50 per share) , stands at +1.33%. This is a meaningful and leading indicator of a likely positive surprise.
Zacks Rank: Panera Bread Company has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Meanwhile, the Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement.
The combination of Panera Bread Company’s Zacks Rank #2 and +1.33% ESP makes us confident of an earnings beat.
Factors to Consider
Panera Bread’s Panera 2.0 program, menu innovation and promotional strategies have started yielding results, with sales improving at the converted restaurants. We expect sales to continue to improve in the first quarter as well.
However, the company is incurring heavy costs related to the implementation of digital initiatives under Panera 2.0. Additionally, higher food costs along with increased labor expenses, is offsetting the positive impact of the company’s strategic efforts, thereby hurting profits. We expect profits to remain under pressure in the to-be-reported quarter.
Other Stocks to Consider
Here are some other stocks in the restaurant industry that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Red Robin Gourmet Burgers Inc. (NASDAQ:RRGB) , with an Earnings ESP of +0.91% and a Zacks Rank #3.
Bojangles', Inc. (NASDAQ:BOJA) with an Earnings ESP of +5.88% and a Zacks Rank #3.
Domino's Pizza, Inc. (NYSE:DPZ) , with an Earnings ESP of +2.06% and a Zacks Rank #2.
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PANERA BREAD CO (PNRA): Free Stock Analysis Report
DOMINOS PIZZA (DPZ): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
BOJANGLES INC (BOJA): Free Stock Analysis Report
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