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Will Panera Bread (PNRA) Q3 Earnings Surprise Estimates?

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Panera Bread CompanyPNRA is set to report third-quarter 2015 results on Oct 27, after the market closes. Last quarter, the company posted a negative earnings surprise of 1.23%. In fact, the company has posted negative earnings surprises in three of the trailing four quarters. Let's see how things are shaping up for this announcement.

Factors to Consider

Panera Bread comps improved sequentially in the second quarter. The trend is expected to continue in the third quarter backed by extensive menu innovation and digital initiatives associated with the Panera 2.0 program.

The company has also updated its Kitchen Display and upgraded certain kitchen equipment. In fact, Panera's initiatives to drop all artificial additives from its menu and use antibiotic-free chicken in all items makes it popular among the health conscious consumers, therefore aiding traffic.

In fact, given the strong comps in the first 27 days of the third quarter, the company expects comps to be up a bit higher than the full year guidance range of 2% to 3.5%. The company attributes the positive trend to its strategic plan, strength of Panera 2.0 and innovation in operations, food, and marketing.

The initiatives related to information technology are intended to serve its customers better and strengthen its position. However, these changes would lead to higher general and administrative expenses and therefore profits are expected to continue to remain under pressure in the third quarter.

Additionally, commodity costs are expected to increase with the rise in prices of beef owing to diseases and widespread drought. This might considerably dent the company's profits. In fact, the company expects earnings to be down year over year in the soon-to-be reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Panera Bread is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Its Earnings ESP stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.31.

Zacks Rank: Panera Bread has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement.

Stocks to Consider

Here are some companies in the restaurant industry that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Starbucks Corp. SBUX with an Earnings ESP of +2.33% and a Zacks Rank #2 (Buy).

Shake Shack Inc. SHAK with an Earnings ESP of +14.29% and a Zacks Rank #2.

Wingstop Inc. WING with an Earnings ESP of +11.11% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

PANERA BREAD CO (PNRA): Free Stock Analysis Report

STARBUCKS CORP (SBUX): Free Stock Analysis Report

SHAKE SHACK INC (SHAK): Free Stock Analysis Report

WINGSTOP INC (WING): Free Stock Analysis Report

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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