Yum! Brands, Inc. (NYSE:YUM) is the first stock to be discussed. The Street expects the stock to report EPS of $0.58 and revenue of $3.04 billion. Yum! Brands, Inc. (NYSE:YUM) has operations in both the US and internationally. The restaurant chain calls its outside US business by the name of Yum! Brands, Inc. (NYSE:YUM) Restaurant International or simply YRI.
The Street is pretty bullish on operations within the US. However, as far as YRI is concerned, growth seems to be limited. The growth is especially threatened by a weak Chinese economy. This is why, despite an earnings beat, the stock may not move up given a weak forecast for 2013. Similarly, Goldman is meaningfully below consensus for the full-year and does not recommend bidding the shares higher even in the event of a strong quarterly print. China results are the primary driver, and thus the market is looking to better understand the margin dynamics in that geography given the meaningful fall-off in sales. This, and further color around the recent bird flu outbreak, may trump all other areas of the P&L.
Panera Bread Co (NASDAQ:PNRA) is another player on the list that is expected to announce its quarterly result on the same date. The bakery café chain has been the talk of the town lately. It recently launched a new marketing campaign, which is said to be a successful one (in 2Q13)
The company is expected to post EPS of $1.65 and revenue of $566.3 million. Though, the company might not be able to top the results given that the consensus estimates are expected to truly reflect the performance of the company in 1Q13. However, investors might see a rally in the stock given some positive commentary on April numbers.
The company’s two-year same-store-sales (SSS) run rate has been running in the +12% range, which implies an acceleration to 6-7% SSS in April. There could be upside to that figure if Panera Bread Co (NASDAQ:PNRA)’s new marketing campaign or pasta launch drives incremental traction with consumers.
At this point, bears might want to say that this rally could be a temporary one given the temporary nature of the marketing campaign itself. However, this might not be true given that strong fundamentals will likely drive further upside in the shares.
Declining margins has been another theme in this industry for the first quarter of 2013. Goldman thinks that that restaurant EBIT margins are expected to be down due to fixed cost de-leveraging from lower sales. And Brinker International, Inc. (NYSE:EAT) has been a good example of this phenomenon. The company is expected to post EPS of $0.69 and revenue of $741.5 million.
However, despite an expected decline in margins, the quarterly results are expected to serve as a positive catalyst as the next quarter’s fiscal 4Q13 estimates may be too low. 4Q13 SSS growth of 2.8% (versus 1.6% consensus) and EPS of $0.80 (versus $0.76 consensus) is expected. Any forward management commentary about current sales trends may drive the shares higher. Disclosure around its remodels, its recent pizza roll-out and international agreements may also come into play to send the stock price higher.
Foolish Bottom Line
Panera Bread Co (NASDAQ:PNRA) and Brinker International, Inc. (NYSE:EAT) are recommended as buys on the basis of strong fundamentals and conservative estimates, respectively. On the other hand, investors are recommended to maintain a neutral position in Yum! Brands, Inc. (NYSE:YUM) given its weak Chinese outlook.
The article 3 Stocks: Same Industry, Same Earnings Release Date, But Different Outlooks originally appeared on Fool.com and is written by Zain Abbas.
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