There's no shortage of stocks working, but two former leaders in the restaurant space have been lagging the market as Wall Street questions growth prospects ahead. Both reported earnings late Tuesday.
Consistent execution hasn't been the problem for Panera Bread (PNRA) and Chipotle Mexican Grill (CMG). Both have solid management teams and impressive records of growth, but recent price and volume trends in each stock indicate that growth-fund managers aren't as interested in owning the stocks as they once were.
On the surface, the numbers at Panera Bread looked OK. Earnings rose 23% from a year ago to $1.75 a share. Sales increased 15% to $571.5 million. Consensus estimates called for profit of $1.74 per share on sales of $574.8 million. It was the second straight quarter where sales growth slowed from the previous quarter. Same-stores sales, which exclude sales at newly opened stores, rose 4.9%.
From a technical perspective, Panera's 200-day simple moving average (SMA) has been a support level for several weeks. It's only about 7% off its recent high. Buying demand for shares of Panera was slack ahead of earnings, but in premarket trading, shares rose 4.37% to $170.
Panera's Dec. 19 intraday high of $168.84 is a key resistance level for now. A close above this price level in heavy volume would be a bullish development.
Meanwhile, the numbers at Chipotle didn't look too bad either. Profit rose nearly 8% to $1.95 per share. Sales rose 17% to $699.2 million. Analysts expected earnings of $1.96 on sales of $698.9 million, on average. For Chipotle, the results marked the third straight quarter of decelerating sales growth.
Chipotle opened 180 restaurants in 2012, including 60 in the fourth quarter alone. For 2013, it plans to open 165 to 180 new locations.
Rising input costs have been a known problem at Chipotle for several months. When Chipotle reported weak third-quarter results in October, shares gapped down 15% on Oct. 19.
Shares initially popped 4% in after-hours trading Tuesday, but in premarket trading Wednesday, shares fell as much as 1% to $302.
Chipotle's chart looks worse than Panera's. Selling pressure has been more pronounced in Chipotle. Between April and October last year, Chipotle corrected about 50%. Headed into Wednesday, it was 31% off its 52-week high. The shares have been in rally mode lately, but its 200-day SMA around $327 looks like a significant resistance level for now.