Pnra Rolls
Image source: Panera Bread.

Conditions in the restaurant industry change constantly, and companies move in and out of favor all the time. Fast-casual restaurant chain Panera Bread (NASDAQ:PNRA) and Mexican food specialist Chipotle Mexican Grill (NYSE:CMG) have long been fan favorites among their customers, and both share a devotion to high-quality ingredients and strong customer service. But Chipotle has suffered from concerns related to foodborne illnesses, and coming into Panera's fourth-quarter financial report on Tuesday, some shareholders hope that Chipotle customers who defected from the burrito maker during the scare might have come to Panera restaurants instead. Let's take a closer look at what investors should focus on from Panera Bread this quarter.

Stats on Panera Bread

Analyst EPS Estimate

$1.78

Change From Year-Ago EPS

(4.8%)

Revenue Estimate

$695.43 million

Change From Year-Ago Revenue

3.4%

Earnings Beats in Past 4 Quarters

2

Data source: Yahoo! Finance.

Can Panera earnings rise?
Analysts haven't made massive changes in recent months to their views on Panera earnings, keeping their fourth-quarter estimates stable and pushing their full-year 2016 projections up by just $0.02 per share. The stock has fared much better, rising 10% since late October despite facing challenging conditions in the overall stock market.

Panera's third-quarter earnings report showed the mixed results that investors have gotten used to seeing from the fast-casual chain. Revenue climbed 7% on a 3.8% rise in company-owned comparable-restaurant sales. Substantial increases in Panera's costs sent earnings moving in the opposite direction, and overall net income dropped more than 8% despite beating the consensus forecast by $0.01 per share.

One problem that Panera faces is that the fast-casual industry has gotten extremely competitive. Based on both its success and that of Chipotle, many newer restaurant chains have emerged onto the scene, seeking to differentiate themselves while also riding on the coattails of their trailblazing peers. Moreover, now that Chipotle faces challenges of its own in recovering from recent outbreaks of illness from its restaurants, Panera will need to prepare for a potentially more aggressive strategy from Chipotle that could result in more direct competition between the two industry giants.

In particular, Panera's identification of ancillary businesses could be vulnerable to oversaturation. Panera executives have embraced the idea of moving into catering, delivery, and consumer-packaged goods as ways to offer growth avenues beyond ordinary restaurant sales. But Chipotle certainly has the scale to mimic any such moves, and doing so could reduce the effectiveness of a Panera move in that direction.

Similarly, Panera will have to deal with other restaurants seeking to make themselves more attractive to users of mobile technology. The massive conversions under the company's Panera 2.0 initiative have been aimed at improving order flow and giving Panera a perceived edge over Chipotle and other restaurants lacking such systems. Yet in some ways, Panera is playing catch-up to Starbucks (NASDAQ:SBUX) and its mobile order and payment app. The Starbucks app allows customers to pay and avoid standing in line, something that resonates especially well with those who frequent the coffee giant. As the trend catches on, it'll be harder for Panera to keep Chipotle and others from simply adopting the same technology and making the competitive advantage disappear.

Even with everything going on, the most important thing for investors to focus on in the Panera earnings report is whether the fast-casual chain boosted its growth in comps. If Chipotle's woes sent some customers in Panera's direction, then the next challenge will be to make sure it holds onto them for the long haul.

Dan Caplinger owns shares of Starbucks. The Motley Fool owns shares of and recommends Chipotle Mexican Grill, Panera Bread, and Starbucks. 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.