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Darden (DRI) Tops Q3 Earnings, Lifts View for FY17, Stock Up

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Shares of Darden Restaurants, Inc. (DRI - Free Report) rose nearly 4% in afterhours trading on Mar 27, after the company reported better-than-expected third-quarter fiscal 2017 results.

Notably, this quarter marked the tenth consecutive earnings beat for the company. Also, Darden raised its full-year fiscal 2017 adjusted earnings per share (EPS) projection.

Earnings and Revenues Discussion

Adjusted EPS were $1.32, beating the Zacks Consensus Estimate of $1.27 by 3.9%. Further, earnings surged 9.1% year over year on the back of higher revenues and lower share count.

 

 

Total revenue of $1.88 billion surpassed the Zacks Consensus Estimate of $1.86 billion by nearly 1%. Further, revenues increased 1.7% year over year.

Behind the Headline Numbers

Since the beginning of fourth-quarter fiscal 2015, Darden started reporting under four new segments: Olive Garden, LongHorn Steakhouse, Fine Dining, which includes The Capital Grille and Eddie V's, and Other Business. The Other Business segment includes Yard House, Seasons 52, Bahama Breeze, consumer packaged goods, and franchise revenues.

The company posted comps growth of 0.9% in the quarter, on a fiscal calendar basis. However, it was weaker than the comps growth of 1.7% in the preceding quarter. Meanwhile, the company witnessed an increase in sales across majority of its brands in the fiscal third quarter.

Sales at Olive Garden were up 1.5% year over year to $1.04 billion. A 1.4% increase in comps at Olive Garden was lower than the prior-quarter comps growth of 2.6%. Traffic declined 0.2%, however, there was a 1.3% improvement in pricing and 0.3% growth in menu mix.

Sales at Fine Dining increased 5.3% to $153.7 million. Comps at The Capital Grille rose 0.9%, lower than the prior-quarter comps growth of 1.2%. Meanwhile, Eddie V's posted comps growth of 4.7% higher than the 2.7% improvement recorded in the preceding quarter.

Revenues from Other Business inched down 0.2% year over year to $255.6 million. Comps at Seasons 52 inched up 0.8% for the quarter, as against the prior-quarter comps’ decline of 0.3%. Meanwhile, comps grew 0.5% at Bahama Breeze, lower than the comps growth of 2.6% in the preceding quarter. However, comps at Yard House dipped 1% for the quarter, comparing unfavorably with the 0.7% growth recorded in the last quarter.

At LongHorn Steakhouse, sales rose 2.1% to $434.3 million. Comps at LongHorn Steakhouse increased 0.2%, higher than the prior-quarter comps growth of 0.1%. Though traffic declined 1.6%, pricing and menu mix grew 1.6% and 0.2%, respectively.

Fiscal 2017 Outlook

The company now anticipates earnings in the range of $3.95 to $4.00 per share (earlier $3.87--$3.97 per share), reflecting an updated outlook for comps growth of roughly 1.5% (earlier 1% to 2%). The Zacks Consensus Estimate for fiscal 2017 earnings is pegged at $3.93 per share.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise

 

Darden Restaurants, Inc. Price, Consensus and EPS Surprise | Darden Restaurants, Inc. Quote

Zacks Rank & Stocks to Consider

Darden currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in this sector include Papa John's International Inc. (PZZA - Free Report) , Restaurant Brands International Inc. (QSR - Free Report) and Bob Evans Farms, Inc. . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Papa John’s 2017 earnings climbed 1.4% over the past 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 10.26%.

Restaurant Brands’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 19.20%. Meanwhile, for 2017, EPS is expected to improve 14.9%.

The Zacks Consensus Estimate for Bob Evans Farms’ fiscal 2017 earnings climbed 1.3%, over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 12.74%.

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