Shares of Panera Bread CompanyPNRA 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%.
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.
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.
PANERA BREAD CO Price, Consensus and EPS Surprise
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. DPZ , Wingstop Inc. WING and Potbelly Corporation 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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