We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Darden's (DRI) Q3 Earnings to Reflect Cost-Saving Efforts
Read MoreHide Full Article
Darden Restaurants, Inc. (DRI - Free Report) is set to report third-quarter fiscal 2018 results on Mar 22, before the market opens.
The company, like most other restaurant operators, has been bearing the burden of high costs associated with labor, food and beverage, and other restaurant operations. Moreover, Darden is particularly susceptible to increased expenses due to its non-franchised model. However, aggressive cost-saving initiatives are likely to aid the company's expand margins, thereby improving earnings.
Notably, shares of Darden have rallied 23.2% in the past year, outpacing its industry’s gain of 13.8%.
High Costs Likely to Prevail
Darden, like several other restaurant operators, is shouldering increased labor costs due to the Affordable Care Act. Moreover, sales building strategies like greater focus on culinary innovation, restaurant remodeling and technology-driven initiatives are likely to add to the company’s expenses.
Subsequently, in the second quarter of fiscal 2018, Darden’s total operating cost and expenses increased 14.8% year over year to nearly $1.8 billion. This was led by an overall increase in food and beverage costs, restaurant labor and expenses, marketing as well as general and administrative expenses.
The Zacks Consensus Estimate for food and beverage expenses in the to-be-reported quarter is pegged at $618 million, suggesting a 14% year-over-year increase.
Also, costs from labor and restaurant-level operation are estimated to be $677 million and $368 million, mirroring a year-over-year hike of 17.1% and 15%, respectively.
Cost Savings to Benefit Earnings
Amid a challenging cost environment, Darden is focusing on an aggressive cost management plan. For fiscal 2018, the company expects 10-40 basis points (bps) year-over-year margin expansion as a result of cost savings.
In the second quarter of fiscal 2018, adjusted EBIT margin increased 10 bps from the year-ago quarter. The upside was favored by the company’s cost savings and comps growth. Food and beverage costs in the quarter compared favorably with 20 bps in the prior-year quarter. Pricing of roughly 1.5% and costs savings more than offset commodity cost inflation in the quarter.
We believe, cost savings and increased revenues across all brands are likely to continue favoring the company’s EBIT margin and drive the to-be-reported quarter’s earnings. The consensus estimate for third-quarter earnings is pegged at $1.64, mirroring 24.2% year-over-year growth.
DineEquity, BJ's Restaurants, Carrols Restaurant Group’s earnings for 2018 are expected to grow 22.7%, 27% and 30%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Darden's (DRI) Q3 Earnings to Reflect Cost-Saving Efforts
Darden Restaurants, Inc. (DRI - Free Report) is set to report third-quarter fiscal 2018 results on Mar 22, before the market opens.
The company, like most other restaurant operators, has been bearing the burden of high costs associated with labor, food and beverage, and other restaurant operations. Moreover, Darden is particularly susceptible to increased expenses due to its non-franchised model. However, aggressive cost-saving initiatives are likely to aid the company's expand margins, thereby improving earnings.
Notably, shares of Darden have rallied 23.2% in the past year, outpacing its industry’s gain of 13.8%.
High Costs Likely to Prevail
Darden, like several other restaurant operators, is shouldering increased labor costs due to the Affordable Care Act. Moreover, sales building strategies like greater focus on culinary innovation, restaurant remodeling and technology-driven initiatives are likely to add to the company’s expenses.
Subsequently, in the second quarter of fiscal 2018, Darden’s total operating cost and expenses increased 14.8% year over year to nearly $1.8 billion. This was led by an overall increase in food and beverage costs, restaurant labor and expenses, marketing as well as general and administrative expenses.
The Zacks Consensus Estimate for food and beverage expenses in the to-be-reported quarter is pegged at $618 million, suggesting a 14% year-over-year increase.
Also, costs from labor and restaurant-level operation are estimated to be $677 million and $368 million, mirroring a year-over-year hike of 17.1% and 15%, respectively.
Cost Savings to Benefit Earnings
Amid a challenging cost environment, Darden is focusing on an aggressive cost management plan. For fiscal 2018, the company expects 10-40 basis points (bps) year-over-year margin expansion as a result of cost savings.
In the second quarter of fiscal 2018, adjusted EBIT margin increased 10 bps from the year-ago quarter. The upside was favored by the company’s cost savings and comps growth. Food and beverage costs in the quarter compared favorably with 20 bps in the prior-year quarter. Pricing of roughly 1.5% and costs savings more than offset commodity cost inflation in the quarter.
We believe, cost savings and increased revenues across all brands are likely to continue favoring the company’s EBIT margin and drive the to-be-reported quarter’s earnings. The consensus estimate for third-quarter earnings is pegged at $1.64, mirroring 24.2% year-over-year growth.
Zacks Rank & Other Stocks to Consider
Darden carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the industry include DineEquity (DIN - Free Report) , BJ's Restaurants (BJRI - Free Report) and Carrols Restaurant Group (TAST - Free Report) . While DineEquity sports a Zacks Rank #1 (Strong Buy), BJ's Restaurants and Carrols Restaurant Group carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
DineEquity, BJ's Restaurants, Carrols Restaurant Group’s earnings for 2018 are expected to grow 22.7%, 27% and 30%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>