Panera Bread Company is scheduled to report first-quarter 2017 numbers on Apr 25, after the market closes. We expect the company to surpass expectations.
Last quarter, Panera delivered a 2.50% 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 2.61%.
Panera Bread Company Price and EPS Surprise
Why a Likely Positive Surprise?
Our proven model shows that Panera is likely to beat on earnings because it has the perfect combination of the two key ingredients.
Zacks ESP: Panera has an Earnings ESP of +2.21% as the Most Accurate estimate is $1.85, while the Zacks Consensus Estimate is pegged at $1.81. This is a meaningful indicator for a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Panera currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of Panera’s favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.
What is Driving Better-than-Expected Earnings?
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 first quarter of 2017.
Meanwhile, Panera has removed all artificial ingredients from its food, which should continue to enhance its popularity among the health-conscious consumers. Additionally, sound marketing initiatives and the company’s loyalty program is expected to 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.
Stocks to Consider
Panera is not the only company looking up this earnings season. Here are some other restaurant companies to consider as our model shows they also have the right combination of elements to post an earnings beat this quarter:
Restaurant Brands International, Inc. (QSR - Free Report) has an Earnings ESP of +5.71% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) has an Earnings ESP of +17.24% and a Zacks Rank #3.
McDonald’s Corporation (MCD - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank #3.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>