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Healthy quick-serve chain Panera Bread (NASDAQ:PNRA) reported fantastic third- quarter results Wednesday, Oct. 24. Revenue surged 17% year over year to $529 million, roughly in line with consensus estimates. Earnings growth outpaced revenue, up 28% year over year to $1.24 per share, which was stronger than consensus expectations. The firm also raised its fourth-quarter earnings outlook to $1.72 to $1.74 per share, which exceeds prior guidance as well as the consensus estimate of $1.70 per share.

System-wide same-store sales increased 5.8% during the quarter, driven by 6.2% growth from company-owned stores and 5.5% growth from franchise-owned stores. Panera's mix of healthy foods and a diverse menu continue to drive expansion, even while other highfliers such as Chipotle (NYSE:CMG) and McDonald's (NYSE:MCD) struggle to retain the growth rates of the past several quarters. Signature salad sales surged 11.6% year over year during the third quarter (salad sales have known grown at least double digits for 12 of the last 13 quarters). The firm also noted that the roasted turkey and avocado BLT sandwich propelled signature sandwich sales 28% during the period. Panera's continued focus on new products should help drive traffic gains while competitors' menus stagnate.

In addition to fantastic menu additions, the company has focused on profitability -- greatly aided by the firm's favorable product mix, which relies less on products that have been hurt by input cost inflation. As a result, the company's operating margin expanded 80 basis points to 11.3%. The firm is also on pace to exceed its restaurant openings goal of 120 units for 2012 thanks to better-than-expected performance during the fiscal year. The firm is targeting similar unit growth during 2013, which helps drive the company's 2013 earnings goal of $6.85 to $7.00 -- representing expansion of 17%-19%. The firm also expects same-store sales to increase 4.5% to 5.5%, a much better prediction than the flat to low single-digit same-store sales forecast provided by Chipotle earlier this earnings season.

Ultimately, we continue to like the performance we've seen from Panera during the past several quarters, and we remain bullish on its future prospects. The company generates fantastic returns on invested capital, and it has experienced relatively low operating volatility in recent years. However, we think shares are fairly valued at current levels. The company's score on our Valuentum Buying Index (our stock-selection methodology) is only 6, so we don't think shares warrant a position in the portfolio of our Best Ideas Newsletter at this time (please view the links on the left side bar for more information).

Source: Panera Shrugs Off Uncertainty