Shares of Panera Bread Co. jumped Wednesday after the bakery-cafe operator reported higher first-quarter profit that beat Wall Street expectations.
THE SPARK: The St. Louis-based company said its net income rose 26 percent in the first quarter to $41.2 million, or $1.40 per share. Analysts polled by FactSet expected earnings of $1.34 per share. The company raised its full-year earnings outlook on the strong results.
THE BIG PICTURE: Panera said the better-than-expected performance was the result of more customers dining at its restaurants, and spending more with each visit. Sales at company-owned restaurants open at least a year rose 7.5 percent. That is considered a critical measure of financial performance as it strips away the impact of recently opened or closed stores.
So far in the second quarter, the company said those sales were up 5.2 percent at company-operated bakery-cafes. There are more than 1,562 company- and franchise-owned locations across the country.
THE ANALYSIS: William Blair analyst Sharon Zackfia noted that Panera's new restaurants continue to perform well, with average weekly sales at company- and franchise-owned locations up from a year ago. She also noted that restaurant-level margins have improved as sales more than offset slightly higher food costs.
In addition, Zackfia said Panera's national ad campaign, launched at the end of the first quarter, is largely focused on long-term brand-building rather than specific promotions that drive short-term sales.
"With the stock trading at 26 times our likely new 2012 estimate, we would be opportunistic buyers of Panera's stock," she wrote. Her rating on the company was "outperform."
SHARE ACTION: Panera's stock rose $11.11, or 7.5 percent, at $159.36 in midday trading. The shares have traded between $96.68 and $165.99 in the last 52 weeks.