Last quarter, Panera delivered a 2.24% positive earnings surprise. In fact, the company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 3.39%.
Let's see how things are shaping up for this announcement.
Panera Bread Company Price and EPS Surprise
Factors Likely to Influence Q4 Results
The company's Panera 2.0 program, menu innovation, promotional strategies and new store design have started yielding results, with sales inching up at the converted restaurants. We expect sales to continue improving in the fourth quarter.
Meanwhile, Panera's endeavor to remove all artificial ingredients from its food continues to enhance its popularity among the health-conscious consumers. Additionally, sound marketing initiatives and the company's loyalty program should boost the quarter's results.
Furthermore, Panera's digitally enabled larger party-sized channels such as delivery, catering, Rapid Pick-Up, along with its Panera At Home business are driving incremental sales at the company. In fact this should turn out to be a strong revenue growth driver in the quarter.
However, the company is incurring heavy costs for implementing the initiatives under Panera 2.0. Also, massive investments along with increased labor and other expenses might offset the positives of the company's strategic efforts, thereby hurting the quarter's profits.
Moreover, a soft consumer spending environment in the U.S. restaurant space might hurt traffic and comps in the to-be-reported quarter.
Our proven model does not conclusively show that Panera is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Panera has an Earnings ESP of -0.50%. This is because the Most Accurate estimate stands at $1.99 per share, while the Zacks Consensus Estimate is pegged higher at $2.00. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Panera has a Zacks Rank #3, which increases the predictive power of ESP. However, the company's negative ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the broader Retail-Wholesale sector to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Carrols Restaurant Group, Inc. TAST has an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .
YUM! Brands, Inc. YUM has an Earnings ESP of +2.82% and a Zacks Rank #3.
Burlington Stores, Inc. BURL has an Earnings ESP of +1.76% and a Zacks Rank #3.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.