Panera Bread Co (PNRA), The Cheesecake Factory Incorporated (CAKE): Which of These Stocks Will Help You Profit the Most?

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The fast-casual restaurant industry’s outlook is not highly positive. Same-store sales are projected to grow in low single digits this year, showing a still sluggish U.S. economy. Many analysts project slower traffic for casual dining restaurants, especially during weekdays. However, bakery-cafes will be less affected since they aim at higher-income families and their pricing maintains good margin levels.

Panera Bread Co (NASDAQ:PNRA)

I will comment on three bakery-cafes to determine which one will be positioned to better profit this year.

A price to consider

Krispy Kreme Doughnuts (NYSE:KKD)
operates as a branded retailer and wholesaler of doughnuts.

The company posted revenue of $120.6 million in its first quarter 2014, up 11.2% year over year. Net income increased 32.7% to $8 million and EPS reached $0.11. These results were driven by good performances in all four of the company’s segments.

Krispy Kreme Doughnuts (NYSE:KKD)’s revenue growth outpaced the industry average of 7.6%, showing bottom line improvements and thus, better earnings per share. In addition, the company has a solid financial position with reasonable debt levels by most measures. Net operating cash flow grew to $14.39 million, up 38.87%, showing the increase in net income.

The company’s strong 37.50% earnings growth plus other driving factors have pushed the stock price up 180% in the past year, surpassing the rise in the S&P 500 during the same period. Year-to-date, the stock has appreciated nearly 90%.

Turnaround for the company, however, is pretty much still in its early stages. Expanding aggressively is what management plans to do by adding stores locally and internationally. Currently, Krispy Kreme Doughnuts (NYSE:KKD) possesses 733 locations in 22 countries, but by adding small freestanding factory shops, the company will increase brand recognition and product availability. Core product offerings are being diversified as well, which should bring more customers and revenue. Plus, more doughnut flavors are under development and high promotional activity is pushing the brand’s beverage business.

Looking to expand

The Cheesecake Factory Incorporated (NASDAQ:CAKE)

operates in the restaurant and bakery businesses.

The company announced an EPS of $0.47 for its first quarter, surpassing the year-ago level by 27%. Revenue reached $463 million, showing a 6.3% increase year over year. Top line and comps growth, along with margin expansion, drove these results.

The Cheesecake Factory Incorporated (NASDAQ:CAKE) is putting a special focus on containing its costs and expanding internationally. Food costs, particularly, have not increased as much for the company throughout this year, which is encouraging. Commodity inflation has moderated on an annualized basis, and management expects it be about 2.5% in fiscal 2013.

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