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Darden (DRI) Up 6.5% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Darden Restaurants, Inc. (DRI - Free Report) . Shares have added about 6.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Darden Beats on Q1 Earnings, Reaffirms FY18 Guidance
Darden reported first-quarter fiscal 2018 adjusted earnings of 99 cents per share, beating the Zacks Consensus Estimate of 98 cents by over 1%. Further, earnings increased 12.5% year over year on the back of higher revenues. Notably, this quarter marked the 12th consecutive earnings beat for the company.
Meanwhile, total revenue of $1.94 billion came slightly above the Zacks Consensus Estimate of $1.93 billion and increased 12.9% 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 that includes The Capital Grille and Eddie V's, and Other Business. The Other Business segment include Yard House, Seasons 52, Bahama Breeze, consumer packaged goods, and franchise revenues.
In April 2017, Darden completed the acquisition of small restaurant chain, Cheddar's Scratch Kitchen (Cheddar's), in an all-cash deal worth $780 million from its stockholders including private-equity firms L Catterton and Oak Investment Partners. Excluding certain expenses, Darden anticipates the transaction to be accretive to its adjusted per share in fiscal 2018 by roughly 12 cents per share.
For the reported quarter, the company’s legacy brands posted blended comps growth of 1.7%. In the previous quarter, the company’s comps witnessed an increase of 3.3%, excluding Cheddar's. Meanwhile, the company witnessed an increase in sales across all its brands in the fiscal first quarter.
Sales at Olive Garden were up 3% year over year to $989.9 million. A 1.9% increase in comps at this segment was much lower than prior-quarter comps growth of 4.4%. Traffic fell 0.3%, while there was a 1.5% improvement in pricing and 0.7% growth in menu mix.
Sales at Fine Dining increased 7% to $122.2 million. Comps at The Capital Grille rose 2%, higher than the prior-quarter comps growth of 0.5%. Meanwhile, Eddie V's posted comps growth of 2.5%, lower than the 3.3% improvement recorded in the preceding quarter.
Revenues from Other Business jumped 66% year over year to $419.5 million. But comps at Seasons 52 fell 2.2% for the quarter, as compared to the prior-quarter comps’ decline of 1.3%. Moreover, comps at Yard House inched down 0.4% for the quarter against a 0.1% rise recorded in the last quarter. Meanwhile, comps grew 1.2% at Bahama Breeze, slightly lower than the comps growth of 1.4% in the preceding quarter.
At LongHorn Steakhouse, sales rose 4.7% to $404.5 million. Comps at LongHorn Steakhouse increased 2.6%, lower than the prior-quarter comps growth of 3.5%. Traffic increased 0.1%, while pricing and menu mix grew 1.5% and 1%, respectively.
For the reported quarter, comps at Cheddar's witnessed a decline of 1.4%.
Fiscal 2018 Outlook
The company reiterated its fiscal 2018 adjusted EPS guidance in the range of $4.38 to $4.50 per share. The Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $4.45 per share.
Moreover, the company reaffirmed its outlook for total sales growth of 11.5% to 13% driven by the addition of Cheddar's and other new restaurant openings. Meanwhile, the company’s legacy brands are still anticipated to post comps growth of roughly 1% to 2%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter.
VGM Scores
At this time, Darden's stock has a great Growth Score of A, though it is lagging a lot on the momentum front with a F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Darden (DRI) Up 6.5% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Darden Restaurants, Inc. (DRI - Free Report) . Shares have added about 6.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Darden Beats on Q1 Earnings, Reaffirms FY18 Guidance
Darden reported first-quarter fiscal 2018 adjusted earnings of 99 cents per share, beating the Zacks Consensus Estimate of 98 cents by over 1%. Further, earnings increased 12.5% year over year on the back of higher revenues. Notably, this quarter marked the 12th consecutive earnings beat for the company.
Meanwhile, total revenue of $1.94 billion came slightly above the Zacks Consensus Estimate of $1.93 billion and increased 12.9% 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 that includes The Capital Grille and Eddie V's, and Other Business. The Other Business segment include Yard House, Seasons 52, Bahama Breeze, consumer packaged goods, and franchise revenues.
In April 2017, Darden completed the acquisition of small restaurant chain, Cheddar's Scratch Kitchen (Cheddar's), in an all-cash deal worth $780 million from its stockholders including private-equity firms L Catterton and Oak Investment Partners. Excluding certain expenses, Darden anticipates the transaction to be accretive to its adjusted per share in fiscal 2018 by roughly 12 cents per share.
For the reported quarter, the company’s legacy brands posted blended comps growth of 1.7%. In the previous quarter, the company’s comps witnessed an increase of 3.3%, excluding Cheddar's. Meanwhile, the company witnessed an increase in sales across all its brands in the fiscal first quarter.
Sales at Olive Garden were up 3% year over year to $989.9 million. A 1.9% increase in comps at this segment was much lower than prior-quarter comps growth of 4.4%. Traffic fell 0.3%, while there was a 1.5% improvement in pricing and 0.7% growth in menu mix.
Sales at Fine Dining increased 7% to $122.2 million. Comps at The Capital Grille rose 2%, higher than the prior-quarter comps growth of 0.5%. Meanwhile, Eddie V's posted comps growth of 2.5%, lower than the 3.3% improvement recorded in the preceding quarter.
Revenues from Other Business jumped 66% year over year to $419.5 million. But comps at Seasons 52 fell 2.2% for the quarter, as compared to the prior-quarter comps’ decline of 1.3%. Moreover, comps at Yard House inched down 0.4% for the quarter against a 0.1% rise recorded in the last quarter. Meanwhile, comps grew 1.2% at Bahama Breeze, slightly lower than the comps growth of 1.4% in the preceding quarter.
At LongHorn Steakhouse, sales rose 4.7% to $404.5 million. Comps at LongHorn Steakhouse increased 2.6%, lower than the prior-quarter comps growth of 3.5%. Traffic increased 0.1%, while pricing and menu mix grew 1.5% and 1%, respectively.
For the reported quarter, comps at Cheddar's witnessed a decline of 1.4%.
Fiscal 2018 Outlook
The company reiterated its fiscal 2018 adjusted EPS guidance in the range of $4.38 to $4.50 per share. The Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $4.45 per share.
Moreover, the company reaffirmed its outlook for total sales growth of 11.5% to 13% driven by the addition of Cheddar's and other new restaurant openings. Meanwhile, the company’s legacy brands are still anticipated to post comps growth of roughly 1% to 2%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter.
VGM Scores
At this time, Darden's stock has a great Growth Score of A, though it is lagging a lot on the momentum front with a F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.