Retail restaurants are increasingly meeting diners' demands by offering healthier menus featuring low calorie options, fewer processed ingredients and more choices for those with dietary restrictions. This not only has major implications for consumers but for investors in these restaurants as well.
Panera Bread leads the healthy fast-casuals
A recent independent survey listed the top 10 fast-casual chains (as of year-end 2012) that are meeting these concerns. Panera Bread (NASDAQ:PNRA) was ranked numero uno mostly due to the casual chain's variety of freshly baked goods and healthy salad choices.
While high rankings in consumer surveys are good for diners, investors are more concerned with the top and bottom lines: revenue and earnings. And Panera's recent guidance suggests the chain is in for lean times on both fronts. This might have triggered the pullback in Panera's share price during the first quarter of 2014.
The stock was trading at $178 as 2013 closed but now hovers at $170. Some might argue to "buy on the dip," but long-term investors are not customarily in the trading game. And it may be a while until Panera's dough has enough yeast.
Moreover, the fast-causal chain posted mixed fourth-quarter results back in February. For the quarter, earnings were up by 12% to $1.96 per share compared to the same year-ago period. Revenue was also up by 16% to $661.7 million.
For the full year, earnings were up 16% to $6.81 per share and revenue was up 12% to approximately $2.4 billion.
Going forward, the company said it was expecting first-quarter earnings in a range of between $1.49 and $1.55 per share. However, the guidance for 2014 earnings was flat bread at best at $6.80 to $7.05 per share. Then in March at the company's investor day, Panera's CEO Ron Shaich restated that guidance. He also said in part:
"We are pleased to share with the investment community the strategic initiatives we have been developing for several years to improve our competitive position...As already reflected in our guidance for fiscal 2014, we anticipate that these investments may depress both margins and earnings growth in fiscal 2014 and 2015."
So Panera might be worth another look in time. Meanwhile, investors looking for other "healthy" alternatives in the fast-casual sector might consider a taste of a chain like Noodles & Company (NASDAQ:NDLS).
Noodles & Company serving lighter dishes
Noodles also made the top 10 list. The fast-casual pasta house operates 380 restaurants in the U.S. along with 62 franchised locations. The menu features a variety of combinations that give health-conscious diners a choice of small entrees, soups, salads, and protein plates that can come in below 500 calories if counting is a concern.
Not only does Noodles offer diners light meal combos, the company is also a good growth story for investors. In fact, the company recently reported the opening of 12 new stores in the most recent quarter. Eight are company owned, the others being franchises. That's a growth rate of 3.2% for the quarter. Coming up, Noodles expects to open 42 to 50 company-owned stores and an additional 10 to 15 franchises.
Other highlights of the financial results reported back in February include net earnings for the fourth quarter of $12 million -- an impressive rise from the same year-ago period. Revenue also rose by 17.4% from $77.9 million to $91.5 million. For the full year, Noodles & Company's net earnings came in at $47.2 million -- a 30.1% growth rate. Finally, total revenue increased 16.8% to $350.9 million.
The most attractive consideration for investors is a share price of $36 and change. Not only is this a better buy than Panera at this time, Noodles' price is still below the 52-week high just shy of $52 per share. So there is plenty of elbow room at the investing table.
Bravo Brio buys into the gluten free craze
Bravo Brio Restaurant (NASDAQ:BBRG) owns and operates a number of casual concepts including BRAVO! Cucina Italiana and BRIO Tuscan Grille (BRIO). Bravo Brio offers light and healthy menu options that are calorie savers. While the company did not place in the survey, management believes low-calorie fare has been one of its most successful initiatives.
Bravo Brio also offers a gluten free menu at both its BRAVO and BRIO concept chains. This is really a consideration for diners with celiac disease and non-celiac sensitivity. Meanwhile gluten free fare has also become the latest chic trend in the food-service industry.
In February, BRAVO also reported fourth-quarter and year-end results. In sum, management noted that adjusted results came in "at the upper end" of its guidance. Going forward, BRAVO will be developing six new restaurants in the coming year and launching a number of initiatives which management believes will continue to raise average checks and improve margins.
In sum, with a current share price of $15.85 and a much leaner forward price/earnings ratio of 16.6, earnings should continue to improve in the coming year. This makes BRAVO a healthy buy for investors with or without gluten sensitivities.
The take out for investors
The broader fast-casual restaurant chain segment offers a number of menu options. But for those looking to make gains on healthy trends in restaurant chains, Noodles & Company and Bravo Brio are good choices for investors with a long-term view.
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Kyle Colona has no position in any stocks mentioned. The Motley Fool recommends Panera Bread. The Motley Fool owns shares of Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.