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What's in Store for Panera Bread (PNRA) in Q3 Earnings?

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Panera Bread Company is scheduled to report third-quarter 2016 numbers on Oct 25, after market close.

Last quarter, Panera delivered a 1.71% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.02%.

Let’s see how things are shaping up for this announcement.

PANERA BREAD CO Price and EPS Surprise

 

PANERA BREAD CO Price and EPS Surprise | PANERA BREAD CO Quote

Factors Likely to Influence this Quarter

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 third quarter.

Meanwhile, Panera’s endeavor to remove all artificial ingredients from its food continues to enhance its popularity among health-conscious consumers. Also, increased focus on catering, sound marketing initiatives and the company’s loyalty program should boost the quarter’s results.

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.

Earnings Whispers

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 -0.74%. This is because the Most Accurate estimate stands at $1.34 per share while the Zacks Consensus Estimate is pegged higher at $1.35.

Zacks Rank: Panera has a Zacks Rank #4 (Sell). 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 restaurant companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

The Wendy's Company (WEN - Free Report) has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fogo de Chao, Inc. has an Earnings ESP of +13.33% and a Zacks Rank #3.

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an Earnings ESP of +7.69% and a Zacks Rank #3.

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