Panera Bread Ready to Rise

Panera Bread's (PNRA) yeast isn't the only thing rising these days. The stock has been performing well since its first-quarter results. Same-store sales are also growing nicely. Over the past month, this year's earnings estimates have increased eight cents to $2.10 per share. Ten of the 12 covering analysts have raised their forecast.

Full Analysis

Panera Bread Company, together with its subsidiaries, operates and franchises retail bakery-cafes in the United States. Its retail products include fresh baked goods, soups, salads, custom roasted coffees, and other complementary products.

As of December 25, 2007, Panera operated 532 company-owned and 666 franchise-operated bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Cafe names.

The company said that first-quarter profit matched last year's results excluding a charge, but it still beat expectations by seven cents. Panera's profit was hurt by a 37% rise in the cost of food and paper products, especially for wheat. Labor and interest expenses also grew substantially in the quarter. Revenue rose 27% to $305 million from $239.7 million in the first quarter of 2007. Analysts predicted revenue of $302.8 million.

Same-store sales, or sales at locations open at least a year, rose 3.3% at company-owned stores and grew 1.7% at franchise-operated locations. Same-store sales is a key indicator of retailer performance since it measures growth at existing locations rather than newly opened ones. Evidently, the results were good as the stock soared after the report.

Satisfied Investors

Investors also loved the fact that management raised guidance. The company said it now expects second quarter profit between 40 cents and 44 cents per share. Previously, the company predicted earnings of 37 cents to 43 cents per share.

Panera added it expects same-store sales, or sales at stores open at least a year, to rise between 5% and 6% at company-owned locations in the quarter. Same-store sales is an important performance indicator because it measures sales at existing locations rather than newly opened ones.

Over the past month, this year's earnings estimates have increased eight cents to $2.10 per share. Ten of the 12 covering analysts have raised their forecast. PNRA has averaged a 6.3% surprise over the past four quarters.

Comments

[mpharbold1]

If PNRA is ready to rise, why does S&P's rate it a strong sell with a price target of 37? I was not impressed by the last qtrly report - they are getting hurt by high wheat prices that don't look ready to drop any time soon. PNRA looks like the next SBUX - it is becoming a mature franchise whose growth will begin to slow and its stock price is still at a valuation as if it is a small start up exploding with growth. I remember when SBUX was over 40 and its now around 15! PNRA is dead in the water - people don't realize it yet.