On top of the solid quarter, the better than expected outlook is likely the main driver of performance today.  Management lifted guidance for the fourth quarter to $.85 to $.87 per share, exceeding the 85 cents that Wall Street was hoping to see.  Furthermore, the outlook appears brighter in fiscal 2010 as well.  Now, Panera expects to make $3.05 to $3.15 for the full year, which again beats estimates of $3.02.  The company foresees same store sales growth of 3% to 5% in the next year, which will rely upon average check growth of 2% to 4%.  That seems to be an attainable goal with modest price increases, but the price increases will go towards offsetting expected cost inflation.  They expect only modest growth in operating profit margin.

This sort of earnings release has given the stock a spark and for good reason.  Management is seeing better operating conditions and has lifted their view of earnings growth based on expanding market share.  We have an Undervalued rating on Panera shares as of this week's report, and the recent price spike will likely not prompt a downgrade in our methodology.  Based on the current fundamentals we would expect PNRA to trade somewhere between $64 and $70.  Until the stock trades in that price range, we think there is reasonable margin of safety to attract value investors.