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Darden Restaurants, Inc.

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Shares of Darden have outperformed the industry over the past year. We are encouraged by the company’s impressive growth story. It reported better-than-expected results in the first quarter of fiscal 2019. Earnings and revenues not only surpassed estimates but also grew 35.4% and 6.5%, respectively, from the year-ago quarter. The upside was driven by sales growth across every brand. Notably, the reported quarter marked the 16th consecutive earnings beat for the company. Various sales initiatives and technology-driven moves are expected to boost the top line in the months ahead. The company’s efforts to check costs are commendable. Current-year earnings estimates have also moved north over the past month. However, fierce competition and softer-than-expected consumer demand can keep comps under pressure while rising labor costs and a non-franchised business model may dampen profits.

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