Panera Bread Co (PNRA), Chipotle Mexican Grill, Inc. (CMG): Fast Profits in Fast Casual

Page 1 of 2

The fast-casual industry has grown gangbusters over the past couple of years and for good reason. Many consumers are trading down, decreasing their time spent at casual-dining restaurants and increasing time at fast-food and fast-casual dining restaurants.

I have to admit, that since the likes of Panera Bread Co (NASDAQ:PNRA) and Chipotle Mexican Grill, Inc. (NYSE:CMG), I rarely spend time at the fast-food joints. Even though both of these stocks are up over 200% over the last five years…

…I still see room for each to move higher. Panera Bread Co (NASDAQ:PNRA) owns or franchises about 1,650 restaurants under the Panera Bread, Saint Louis Bread and Paradise Bakery & Cafe brands. Chipotle Mexican Grill, Inc. (NYSE:CMG) operates 1,230 restaurants, which also include just one of it its newest concepts, ShopHouse Southeast Asian Kitchen.

Growing strong

As the demand for fresh food continues to grow, so too should the revenue of the major fast-casual restaurants that are focused on fresh and healthy foods. Market research firm NPD notes that the restaurants in the fast food and casual dining segments have reported either a decline or growth of 2% in customer traffic over the past four years, while the fast-casual segment has seen 4% to 11% growth.

Panera Bread Co (NASDAQ:PNRA)’s sales are expected to rise some 15% in 2013 and comp sales are projected to grow 5%. Expansion opportunities also appear robust. In 2012, Panera opened 123 locations after opening 112 in 2011. The company plans to open as many as 125 restaurants in 2013.

Chipotle Mexican Grill, Inc. (NYSE:CMG) has grown into one of the most recognized names in Mexican food. One of its big selling points is its motto — Food With Integrity — which includes naturally raised pork, chicken and beef, and organic produce.

Chipotle Mexican Grill, Inc. (NYSE:CMG) is expected to see revenue up 19% in 2013 after being up some 20% in 2012. Same-store sales growth is expected to come in at 4%. Chipotle expects to open some 180 restaurants in 2013, inline with the 183 it opened in 2012.

Chipotle Mexican Grill, Inc. (NYSE:CMG)’s 2Q EPS came in at $2.82, compared to $2.56 for the same period last year, blowing through consensus of $2.67. Meanwhile, same-store sales were up 5.5% in 2Q, up from the 1.0% in 1Q.

Initiatives

Panera Bread Co (NASDAQ:PNRA) is also moving to a more company-owned model. It bought up 16 stores in the Raleigh, N.C. and Durham, N.C. area from a franchisee in 2012. This deal alone is expected to be accretive to EPS by $0.03 to $0.04 in 2013.

One of the biggest things for Chipotle is the possibility of international expansion, namely in Europe. The company already owns seven restaurants on the continent. Also, Chipotle is entering the markets in the U.S. with its ShopHouse restaurants.

 Taco Bell, really?

One of Chipotle’s top competitors is Yum! Brands, Inc. (NYSE:YUM). Billionaire David Einhorn thinks it’s time to short Chipotle, mainly because he thinks that Yum!’s Taco Bell will start to cut into the fast-casual Mexican restaurant’s market share.

I don’t see this as plausible, and feel that the two chains are fundamentally different. I can only imagine the last time that Einhorn actually visited a Taco Bell. Yum! Brands, Inc. (NYSE:YUM) has its hands full with China and Chipotle is likely one of its least concerns as of now.

In July, Yum! posted EPS of $0.56, compared to $0.67 for the same period last year, as revenue fell 8% and same-store sales declined 20% in China. Weaker same-store sales in China should also have an impact on margins. The problem? Remaining overhang and health concerns related to the bird flu and contaminated poultry supplies in China.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!