Panera Caps Off 2012 With A Fantastic Fourth Quarter; Shares Fairly Priced

| About: Panera Bread (PNRA)

Fast casual food seller Panera (NASDAQ:PNRA) announced solid fourth quarter results to cap off an excellent 2012 Tuesday after the market close. Revenue jumped 15% year-over-year to $572 million, roughly in line with consensus expectations. Earnings growth was also strong, with earnings per share increasing 34% year-over-year to $1.75 per share, exceeding consensus expectations. This caps off a year in which sales at Panera jumped 17% and earnings per share increased 29%.

Major metrics at Panera were incredibly positive during the fourth quarter. Company-owned same-store sales increased 5.1% year-over-year, though 5.4 percentage points of the increase was a result of higher average checks as traffic declined 0.3 percentage points year-over-year. Although we're never happy to see traffic declining, we're not too concerned as long as the company shows an ability to raise prices (driving positive earnings expansion). Operating margins were fantastic, increasing 200 basis points year-over-year to 14.6%, driven by lower SG&A, as well as higher gross margins. The trend looks sustainable at this point, and we wouldn't be shocked to see operating margins improve in 2013.

Looking ahead, the firm is targeting earnings per share growth of 17%-19% as it plans to add 115-125 new bakery-cafes in 2013. The firm also believes it will see same-store sales growth of 4.5%-5.5% during the year. Operating margins are forecast to be flat to up 50 basis points in 2013 compared to its 13.3% margin in 2012. We're fairly optimistic that the targeted operating margin will turn out to be conservative, especially after the strong sales leveraging we saw in the last quarter of 2012.

Overall, we were pleased with Panera's fourth quarter results, and we think the company provided relatively strong guidance for 2013. We like Panera's positioning as a healthier alternative to traditional fast food, and we think the company's updated stores provide a great atmosphere to invite consumers to trade down from casual restaurants. Still, we think shares look fairly valued at this time, so we aren't looking to add them to the portfolio of our Best Ideas Newsletter at this time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.