Some "fast casual" eateries seem to have growing appeal and profits, like Chipotle (CMG), and some are really struggling like Panera (PNRA). I actually like Panera a lot -- best oatmeal raisin cookies, and I am an aficionado here -- but the stock has been in a sharp decline since its peak in Q1 above $190 and there's a good reason for it: falling profits.
In the past 90 days, 13 analysts have lowered full-year 2014 EPS estimates from $6.88 to $6.68. That's not a severe drop. But it is part of a longer trend where those estimates were over $8 last year.
And 2015 earnings projections have come down over 7% from $7.71 to $7.15. 2015 had started out last year close to $10. The Zacks proprietary Price & Consensus chart below tells the tale of steadily falling estimates for at least the past year and you can see that the stock price has tracked this decline...
Encouraging Traffic, But Limited Visibility
Stern Agee analysts recently issued a report where they explained their Neutral stance on the stock...
"For 2Q, PNRA reported a quarter of mixed results where EPS met our estimate but revenues fell short due to a negative average check despite positive guest traffic. Overall, we believe the duration of FY14 and FY15 will remain periods of investing in the brand and likely periods of modest earnings growth. While we see the significance of Panera 2.0 for the concept's future, we remain on the sidelines with a Neutral rating as earnings visibility remains limited for at least the next 12 months."
Until the analysts turn around and start raising estimates for PNRA, the cookies and soups in a bread bowl can still be enjoyed, but the stock should be viewed with skepticism. Keep an eye on the Zacks Rank to let you know when the story is turning around.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.