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Darden Restaurants (DRI) Up 6.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Darden Restaurants (DRI - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Darden Restaurants 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 drivers.
Darden Meets Q1 Earnings Estimates
Darden reported mixed results in the second quarter of fiscal 2019, wherein earnings met estimates while revenues lagged the same.
Adjusted earnings of 92 cents per share were in line with the Zacks Consensus Estimate. The bottom line increased 26% year over year on the back of higher revenues. Results were aided by the company’s relentless efforts in improving the basic operating factors of the business — food, service and atmosphere.
Total revenues of $1.973.4 million lagged the consensus mark by 0.4%. However, revenues increased 4.9% from the prior-year quarter. The upside was driven by sales growth across most of the brands.
Revenues by Segments
Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.
In the fiscal second quarter, the company’s legacy brands posted blended comps growth of 2.1%. In the fiscal first quarter, comps increased 3.3%.
Sales at Olive Garden were up 4.9% year over year to $998.1 million. Comps grew 3.5% at the segment, higher than the prior quarter’s comp growth of 5.3%. Traffic fell 0.8% despite 1.9% improvement in pricing and 2.4% growth in menu mix.
Sales at Fine Dining increased 4.3% to $146.7 million. Comps at The Capital Grille rose 3.7% compared with 3.9% reported in first-quarter fiscal 2019. Eddie V's also posted comps growth of 0.9%, lower than 3% improvement recorded in the last reported quarter.
Revenues from Other Business jumped 3.6% year over year to $416 million. However, comps at Seasons 52 fell 0.8% in the reported quarter compared with comps decline of 1.9% in first-quarter fiscal 2019. Comps at Yard House edged down1.1% against 0.6% increase in the last reported quarter. Meanwhile, comps slipped 1.1% at Bahama Breeze, flat quarter over quarter.
At LongHorn Steakhouse, sales rose 6.4% to $412.6 million. Comps at LongHorn Steakhouse increased 2.9%, down from comps growth of 3.1% in the fiscal first quarter. Traffic decreased 0.1% while pricing and menu mix grew 1.7%, and 1.3%, respectively.
In the reported quarter, comps at Cheddar's decreased 4%, same as the prior quarter’s decline.
Operating Highlights & Net Income
In the fiscal second quarter, total operating costs and expenses increased 4.1% year over year to $1,825.3 million. The upside was driven by an overall increase in food and beverage costs, and restaurant expenses. Operating margin in the reported quarter expanded 70 basis points (bps) on a year-over-year basis.
Net earnings in the fiscal second quarter were $115.6 million, recording 36.5% growth from the year-ago level.
Balance Sheet
Cash and cash equivalents as of Nov 25, 2018, totaled $139.7 million, up from $146.9 million as of May 27, 2018.
Inventories totaled$209.4 million at the end of the reported quarter. Goodwill, as a percentage of total assets, was 21.3% in the quarter.
Long-term debt as of Nov 25, 2018, was $927.1 million, up from $926.5 million as ofMay 27, 2018.
During the fiscal second quarter, the company repurchased approximately 0.6 million shares of its common stock for roughly $61 million. The company still has $419 million remaining under the current $500-million repurchase authorization.
Fiscal 2019 Outlook
For fiscal 2019, the company still expects total revenues of 5-5.5%. Comps are projected to increase 2.5% compared with 2-2.5% mentioned previously. Darden’s diluted earnings per share are anticipated to be $5.60-$5.70, up from $5.52-$5.65 mentioned initially.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Darden Restaurants has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Darden Restaurants has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Darden Restaurants (DRI) Up 6.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Darden Restaurants (DRI - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Darden Restaurants 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 drivers.
Darden Meets Q1 Earnings Estimates
Darden reported mixed results in the second quarter of fiscal 2019, wherein earnings met estimates while revenues lagged the same.
Adjusted earnings of 92 cents per share were in line with the Zacks Consensus Estimate. The bottom line increased 26% year over year on the back of higher revenues. Results were aided by the company’s relentless efforts in improving the basic operating factors of the business — food, service and atmosphere.
Total revenues of $1.973.4 million lagged the consensus mark by 0.4%. However, revenues increased 4.9% from the prior-year quarter. The upside was driven by sales growth across most of the brands.
Revenues by Segments
Darden reports business under four segments — Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.
In the fiscal second quarter, the company’s legacy brands posted blended comps growth of 2.1%. In the fiscal first quarter, comps increased 3.3%.
Sales at Olive Garden were up 4.9% year over year to $998.1 million. Comps grew 3.5% at the segment, higher than the prior quarter’s comp growth of 5.3%. Traffic fell 0.8% despite 1.9% improvement in pricing and 2.4% growth in menu mix.
Sales at Fine Dining increased 4.3% to $146.7 million. Comps at The Capital Grille rose 3.7% compared with 3.9% reported in first-quarter fiscal 2019. Eddie V's also posted comps growth of 0.9%, lower than 3% improvement recorded in the last reported quarter.
Revenues from Other Business jumped 3.6% year over year to $416 million. However, comps at Seasons 52 fell 0.8% in the reported quarter compared with comps decline of 1.9% in first-quarter fiscal 2019. Comps at Yard House edged down1.1% against 0.6% increase in the last reported quarter. Meanwhile, comps slipped 1.1% at Bahama Breeze, flat quarter over quarter.
At LongHorn Steakhouse, sales rose 6.4% to $412.6 million. Comps at LongHorn Steakhouse increased 2.9%, down from comps growth of 3.1% in the fiscal first quarter. Traffic decreased 0.1% while pricing and menu mix grew 1.7%, and 1.3%, respectively.
In the reported quarter, comps at Cheddar's decreased 4%, same as the prior quarter’s decline.
Operating Highlights & Net Income
In the fiscal second quarter, total operating costs and expenses increased 4.1% year over year to $1,825.3 million. The upside was driven by an overall increase in food and beverage costs, and restaurant expenses. Operating margin in the reported quarter expanded 70 basis points (bps) on a year-over-year basis.
Net earnings in the fiscal second quarter were $115.6 million, recording 36.5% growth from the year-ago level.
Balance Sheet
Cash and cash equivalents as of Nov 25, 2018, totaled $139.7 million, up from $146.9 million as of May 27, 2018.
Inventories totaled$209.4 million at the end of the reported quarter. Goodwill, as a percentage of total assets, was 21.3% in the quarter.
Long-term debt as of Nov 25, 2018, was $927.1 million, up from $926.5 million as ofMay 27, 2018.
During the fiscal second quarter, the company repurchased approximately 0.6 million shares of its common stock for roughly $61 million. The company still has $419 million remaining under the current $500-million repurchase authorization.
Fiscal 2019 Outlook
For fiscal 2019, the company still expects total revenues of 5-5.5%. Comps are projected to increase 2.5% compared with 2-2.5% mentioned previously. Darden’s diluted earnings per share are anticipated to be $5.60-$5.70, up from $5.52-$5.65 mentioned initially.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Darden Restaurants has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Darden Restaurants has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.