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Why Panera Bread Company Stock Jumped Today

By Dan Caplinger - Jul 29, 2015 at 2:54PM

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2:30 p.m. ET: The fast-casual chain posted mediocre financials for the second quarter, but its outlook was somewhat brighter. Shares were up almost 9%.

What's happening: Shares of Panera Bread ( PNRA ) climbed as much as 11% on Wednesday and were trading up almost 9% as of 2:30 p.m. EDT. The company reported its second-quarter financial results yesterday afternoon, and although Panera's results missed expectations, signs of an uptick to begin the current quarter apparently led investors to believe that the fast-casual chain's growth could accelerate into the second half of 2015.

Why it's happening: Panera's latest report shows the tension between short-term traders and long-term investors. From the perspective of just looking at the past three months, Panera continued to deliver somewhat tepid results, with comparable-restaurant growth of just 1.8% and an earnings decline of 7% compared to the year-earlier quarter. Higher expenses held back profit growth and led to narrower margins, boding ill for Panera's immediate future.

Yet from a longer-term perspective, investors took positive comments from CEO Ron Shaich to heart. Shaich emphasized that it has been costly for the company to upgrade its existing restaurant locations to its new Panera 2.0 standard, but the early results from cafes that have completed the upgrading process have been extremely encouraging. With the restaurant chain planning to do about 300 conversions this year, Panera investors hope that the impact on future growth will be substantial.

Indeed, with comparable-restaurant sales a much healthier 4.7% during the first several weeks of the third quarter, Panera Bread might finally be on a path toward a full rebound. With the stock trading at all-time record highs, Panera investors clearly believe that failure is not an option for the café operator.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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