Panera Bread (PNRA) Q3 Earnings, Revenues Top; Stock Up

Shares of Panera Bread Company (NASDAQ:PNRA) rallied nearly 6% in afterhours trading on Oct 25, after the company reported better-than-expected third-quarter fiscal 2016 results, with both earnings and revenues beating the Zacks Consensus Estimate.

Earnings and Revenue Discussion

Panera Bread’s fiscal third-quarter adjusted earnings per share of $1.37 beat the Zacks Consensus Estimate of $1.34 by 2.2%. Further, EPS increased 3.8% year over year mainly on the back of higher revenues and a lower share count.

Revenues of $684.2 million increased 2.9% 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 $681 million by 0.4%.

Comps Discussion

System-wide comparable net bakery-café sales increased 1.7%, less than 2.3% growth recorded last quarter. Despite an industry slowdown, comps at company-owned units grew 3.4% though lower than the 4.2% rise posted in the fiscal second quarter. Comps at company-owned units reflect year-over-year retail price increases of 2.4%, 0.9% year-over-year growth in entrees served and a positive mix impact of 0.1%.

Panera Bread witnessed 0.2% comps growth at franchisee-operated units, lower than the 0.6% rise in the previous 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 a year-over-year increase in general and administrative expenses, reflecting higher incentive compensation and an increase in depreciation and amortization associated with the company's investments in technology and growth initiatives.

Fourth-Quarter Fiscal 2016 Outlook

Panera Bread expects company-owned comparable net bakery-cafe sales to grow in the range of 3.5% to 4%.

Additionally, the company declared that comps in the first 27 days of the fourth quarter of fiscal 2016 increased 3.4%, indicating that it is off to a strong start in the ongoing quarter.

Fiscal 2016 Guidance

The company raised its previously issued fiscal 2016 EPS guidance. Excluding certain items, adjusted earnings are projected in the band of $6.67 to $6.72 compared with $6.60 to $6.70 expected previously. The new guidance represents growth of 7% to 8% compared with 6% to 8% estimated earlier.

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

Operating margins are now expected to be at the more favorable end of the previously provided range of a decline of 50 bps to 100 bps year over year, excluding the impact of certain items.

Meanwhile, the company continues to expect system-wide bakery-cafe openings in the range of 90 to 100 in fiscal 2016.

Zacks Rank & Stocks to Consider

Panera Bread has a Zacks Rank #4 (Sell). Better-ranked stocks in this sector include Domino's Pizza, Inc. (NYSE:DPZ) , Wingstop Inc. (NASDAQ:WING) and Potbelly Corporation (NASDAQ:PBPB) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Domino’s 2016 earnings moved up 2.4% over the last 60 days. Meanwhile, for full-year 2016, EPS is expected to improve 22.8%.

Wingstop posted positive earnings surprises in all of the last four quarters, with an average beat of 15.46%. Further, for 2016, EPS is expected to grow 18.1%.

Potbelly’s trailing four-quarter average earnings surprise stands at a positive 11.81%. For 2016, the company’s EPS is expected to increase 26.7%.

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