After the market close, Panera Bread announced a new three-year $600 million share-repurchase program that replaces its existing program, which was set to expire on August 23, 2015. Under its previous $600 million authorization, approved in August 2012, the company repurchased a total of 2.4 million shares for about $402 million ($168.42 per share), representing approximately 8% of shares outstanding at the time of the authorization. The new authorization represents about 3.9 million shares using today’s closing price, or roughly 14% of shares outstanding.
We continue to expect share repurchases to be funded by cash, as Panera ended the first quarter with roughly $100 million in cash, and we project free cash flow of nearly $100 million this year and about $200 million in 2015.
Given that the new authorization essentially replaces an existing authorization already accounted for in our model, we are essentially leaving our EPS estimates unchanged at $6.91 for 2014 (up 2% and versus consensus of $6.87) and $7.66 for 2015 (up 11% and versus consensus of $7.70).
We continue to believe Panera’s sales trends could sustainably improve against progressively easier comparisons for the remainder of the year. With the stock down 12% so far this year to an EV-to-EBITDA multiple of just 9.9 times our 2014 estimate, we are optimistic investor enthusiasm will improve as comps accelerate.