Pnra Mac
Image source: Panera Bread.

The stock market has been volatile in recent months, and fast-casual restaurant chain Panera Bread (NASDAQ:PNRA) has seen both ups and downs in its share price as investors try to reconcile challenging conditions right now with the potential for faster growth down the road.

Coming into its third-quarter financial report on Tuesday, Panera shareholders would like to see signs that the restaurant chain's Panera 2.0 initiatives are starting to pay off in improving corporate fundamentals, even as they deal with the fact that short-term results recently have failed to meet expectations.

Let's take a closer look at the things that Panera Bread investors need to watch out for in its results for this quarter.

Stats on Panera Bread

Analyst EPS Estimate

$1.31

Change From Year-Ago EPS

(5.1%)

Revenue Estimate

$667.11 million

Change From Year-Ago Revenue

7.6%

Earnings Beats in Past 4 Quarters

1

Data source: Yahoo! Finance.

When will Panera earnings start growing again?
The negative sentiment surrounding Panera earnings has continued over the past few months, with investors cutting their third-quarter projections by more than 2% and reducing their 2016 earnings forecast by a dime per share. The stock hasn't really gone anywhere, oscillating in both directions but in the end having risen by just 1% since mid-July.

Early in the quarter, investors celebrated Panera's second-quarter earnings despite some troubling results. Sales growth of 7% was less than most had expected, and adjusted earnings fell 7% and also missed the consensus forecast among investors. Yet in a rare show of long-term thinking, shareholders seemed to pay the most attention to improving comparable-restaurant sales both toward the end of the second quarter and in the opening part of the third quarter as an indicator that the Panera 2.0 initiatives were finally starting to show up in the form of faster growth.

What long-term investors appear to be focusing on is Panera's ability to produce business results that most industry experts have only seen from fast-food providers in the past. In August, industry magazine QSR issued its annual rankings of quick-service and fast-casual restaurants, and Panera became the first fast-casual company ever to make its top 10. With average sales of about $2.5 million per restaurant location, Panera has matched industry giant McDonald's (NYSE:MCD) while maintaining a much faster pace of restaurant growth than the Golden Arches.

Panera's future potential also remains intact. CFO Mike Bufano recently told investors that catering, packaged goods for consumer purchase, and delivery could each become billion-dollar businesses in their own right. Panera already has some branded products for sale, but the company clearly has the potential to ramp up its presence on the shelves of grocery and convenience stores. Given the success that other companies have had in taking their products directly to consumers through multiple distribution methods, Panera is right to look to use its strong reputation to build a presence outside its own bakery cafes.

Still, some worry about some recent moves that Panera made and their potential impact on its quarterly results. One analyst cited the removal of the Smokehouse Turkey and Chipotle Chicken panini sandwiches from the Panera menu as possibly contributing to a slowdown in customer traffic. Moreover, even though investors already expected some additional costs from the Panera 2.0 upgrades, some believe that near-term increases in labor training expenses could turn out to be greater than expected, weighing on this quarter's earnings.

In the Panera earnings report, the most important thing for the company to demonstrate will be that its early take on accelerating same-restaurant sales actually maintained its momentum throughout the course of the quarter. If growth in comps slowed back down to its recent pace, then investors could be in for a shock when Panera releases its full results for the quarter.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.