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Why Panera (PNRA) Stock Still Has Plenty of Upside Left
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Shares of bakery-café giant Panera Bread Company have increased nearly 21% over the last six months, comparing favorably with the Zacks categorized Retail–Restaurants industry’s fall of 1.7%. In fact, the company scaled a new all-time high of $241.13 in yesterday’s trading session, and closed a tad bit lower at $240.77.
The company’s consistent top- and bottom–line performance on the back of various sales-building and marketing initiatives, along with its focus on digitally enabled larger party-sized channels, has given the stock this momentum.
While no one can say for sure, it is certainly encouraging that earnings estimates have risen in the past few weeks on the company, suggesting that sentiment on Panera is moving in the right direction.
Over the last 60 days, the Zacks Consensus Estimate for current quarter earnings has moved up 7.1% to $1.80, reflecting eight upward revisions versus none downwards. Also, current year’s earnings estimate has inched up nearly 1%, on the back of six upward revisions, against one downward.
This positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. However, the decidedly bullish analyst sentiment indicates that the stock’s growth story is intact and this stock might just be one that is flying under the radar.
Meanwhile, looking at the fundamentals of the company, Panera seems well-positioned for consistent revenue growth. In fact, the company has recorded a historic sales growth of 8% in the last five years, while the industry’s average was 4.2%.
Going forward, focus on channels like catering and delivery, along with its Panera at Home business, bode well and should drive incremental revenues at the company. We are also positive on the company’s removal of all artificial ingredients from its food items, which is expected to drive its popularity among health-conscious consumers. All these factors project this year’s sales growth to be nearly 6%.
Moreover, the company has been working on its store design to enhance customer experience. In fact, the Panera 2.0 program, new store designs, along with innovation in food and operations, have started yielding results. Also, the company notes that the cafes which have been converted to Panera 2.0 continue to outperform the traditional ones.
Additionally, Panera currently provides a return on equity (trailing twelve months) of 45.4%, in an industry where other restaurant stocks like Brinker International, Inc. (EAT - Free Report) , Domino’s Pizza, Inc. (DPZ - Free Report) and Bravo Brio Restaurant Group, Inc. , to name a few, have eroded equity in the same time frame.
However, over the next few years, Panera will continue to invest heavily in its operational capabilities including initiatives related to information technology to serve its customers better and strengthen its position in the market. These changes in turn are anticipated to lead toward higher general and administrative expenses, which include labor and advertising expenses.
Additionally, the company’s aim to make additional unit openings is likely to increase pre-opening expenses. Moving ahead, the company expects startup and transition costs related to immature Panera 2.0 cafes to weigh on margins.
Nevertheless, the company is confident that its efforts will translate into strong comps and sustainable double-digit EPS growth 2017 onwards. Thus, we remain optimistic about the stock’s prospects over the long term.
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Why Panera (PNRA) Stock Still Has Plenty of Upside Left
Shares of bakery-café giant Panera Bread Company have increased nearly 21% over the last six months, comparing favorably with the Zacks categorized Retail–Restaurants industry’s fall of 1.7%. In fact, the company scaled a new all-time high of $241.13 in yesterday’s trading session, and closed a tad bit lower at $240.77.
The company’s consistent top- and bottom–line performance on the back of various sales-building and marketing initiatives, along with its focus on digitally enabled larger party-sized channels, has given the stock this momentum.
While no one can say for sure, it is certainly encouraging that earnings estimates have risen in the past few weeks on the company, suggesting that sentiment on Panera is moving in the right direction.
Over the last 60 days, the Zacks Consensus Estimate for current quarter earnings has moved up 7.1% to $1.80, reflecting eight upward revisions versus none downwards. Also, current year’s earnings estimate has inched up nearly 1%, on the back of six upward revisions, against one downward.
This positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. However, the decidedly bullish analyst sentiment indicates that the stock’s growth story is intact and this stock might just be one that is flying under the radar.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, looking at the fundamentals of the company, Panera seems well-positioned for consistent revenue growth. In fact, the company has recorded a historic sales growth of 8% in the last five years, while the industry’s average was 4.2%.
Going forward, focus on channels like catering and delivery, along with its Panera at Home business, bode well and should drive incremental revenues at the company. We are also positive on the company’s removal of all artificial ingredients from its food items, which is expected to drive its popularity among health-conscious consumers. All these factors project this year’s sales growth to be nearly 6%.
Moreover, the company has been working on its store design to enhance customer experience. In fact, the Panera 2.0 program, new store designs, along with innovation in food and operations, have started yielding results. Also, the company notes that the cafes which have been converted to Panera 2.0 continue to outperform the traditional ones.
Additionally, Panera currently provides a return on equity (trailing twelve months) of 45.4%, in an industry where other restaurant stocks like Brinker International, Inc. (EAT - Free Report) , Domino’s Pizza, Inc. (DPZ - Free Report) and Bravo Brio Restaurant Group, Inc. , to name a few, have eroded equity in the same time frame.
However, over the next few years, Panera will continue to invest heavily in its operational capabilities including initiatives related to information technology to serve its customers better and strengthen its position in the market. These changes in turn are anticipated to lead toward higher general and administrative expenses, which include labor and advertising expenses.
Additionally, the company’s aim to make additional unit openings is likely to increase pre-opening expenses. Moving ahead, the company expects startup and transition costs related to immature Panera 2.0 cafes to weigh on margins.
Nevertheless, the company is confident that its efforts will translate into strong comps and sustainable double-digit EPS growth 2017 onwards. Thus, we remain optimistic about the stock’s prospects over the long term.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>