Panera Bakes Up a Decent Quarter, But Offers Unappealing Outlook



Over the course of the trading day, Wall Street managed to convince itself that Panera Bread Co. (NYSE:PNRA) would miss consensus analyst estimates when it reported fourth-quarter and full-year results after the closing bell. The pessimism may have stemmed from earnings and revenue estimates calculated by Estimize, a platform with a track record of being more accurate than the Wall Street consensus, which forecast results below Wall Street consensus. Estimize was looking for earnings of $1.94 per share while Wall Street was looking for $1.95; Estimize was looking for revenue of $660.91 million, while Wall Street was looking for $663.97 million. Shares closed the day down 2.83 percent at $173.18, below where they closed on Tuesday of last week.

But Panera didn’t quite follow the script. Fourth-quarter earnings increased 12 percent on the year to $1.96 per share, spurred by both strong performance and $139 million in share repurchases during the quarter. Revenue increased 16 percent to $661.7 million as comparable-store sales increased 1.7 percent. For the year, earnings increased 16 percent to $6.81 per share, beating the mean analyst estimate of $6.66. Revenue increased 12 percent to $2.39 billion, in line with analyst expectations.

The top-line miss (relative to the Wall Street consensus) for the fourth-quarter helped drive shares down about 1 percent in post-market trading. The quick-serve restaurant industry has grown incredibly rapidly over the past few years and Panera has capitalized on that growth, which has led to high growth expectations for the company. Panera has averaged an annual revenue growth rate of about 15.2 percent over the past three years, and shares have grown more than 47 percent over the same period.

“We are executing on our strategic plan to enhance our customers’ experience. We are convinced that these investments will enable us to better meet our customers’ ever-evolving needs,” commented Chair and CEO Ron Shaich in the earnings report. “While we expect these investments will result in modest earnings growth in the near term, we believe they will lead to expanded transactions, comparable store sales, and ultimately earnings growth, well into the future.” Panera pointed out that quarter-to-date comparable store sales are down about 2.2 percent, thanks primarily to adverse weather.

Looking ahead to the first-quarter of 2014, Panera is targeting earnings in a range between $1.49 and $1.55 per share, well below the current mean analyst estimate of $1.70 per share. For the year, Panera is estimating earnings in a range between $6.80 and $7.05 per share, below the current mean analyst estimate of $7.31 per share. The company is targeting full-year comparable-store sales growth in a range between 2 and 4 percent.