Panera Bakes Up A Beat And Raise Quarter

BTIG said in a note that Panera Bread Co PNRA withstood tepid industry sales trend and baked in a beat and raise. The firm noted the company reported third quarter earnings per share of $1.37, ahead of its estimates and the company's guidance, with the upside attributable to stronger bakery-café margins and a lower tax rate offset by higher D&A and G&A.

Comps. Story Lukewarm

Analyst Peter Saleh noted that company-owned comps rose below his estimates, as check growth was offset by traffic decline. Franchise comps was anemic at a 0.2 percent increase, notably below the analyst's 1.5 percent estimate. Driven by Panera 2.0, the analyst noted that gap between company-owned comps. and franchise comps. narrowed to 320 basis points from 360 basis points in the second quarter of 2016.

Q4 Trends & Outlook

In the first 27 days of the fourth quarter, BTIG noted that company-owned comps rose 3.4 percent, including a 35-40 basis point-negative impact from Hurricane Matthew. For the full year, the firm expects comps of 3.5-4 percent.

The company raised its fourth quarter EPS guidance to $6.67-$6.72 from $6.60-$6.70, including an estimated $1.96-$2.01 expectation for the fourth quarter. This compares to BTIG's initial guidance of $2.01 per share for the fourth quarter.

BTIG's Take

The firm believes the investment the company is making in technology enhancement is leading to the improvement in same-store sales, as reflected by the narrowing gap between company-owned and franchise comps. Going forward, the firm expects Panera's same-store sales and earnings would continue to improve through 2017, thanks to the significant investment made in Panera 2.0 and the resultant margin pressure of the last two years.

As such, BTIG reiterated its Buy rating and $240 price target for shares of Panera Bread.