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Here's Why You Should Buy Darden Restaurants (DRI) Stock Now
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Darden Restaurants, Inc. (DRI - Free Report) is likely to gain from strategic initiatives and digitalization efforts.
Shares of the company have gained 20% in the past three months compared with the Zacks Retail - Restaurants industry’s growth of 13.6%. The Zacks Rank #2 (Buy) company’s 2024 earnings and sales are likely to witness growth of 10.9% and 9.9% year over year, respectively.
Let’s delve deeper and find out the factors driving the stock higher.
Focus on Strategic Initiatives Bode Well: DRI implemented the Brand Renaissance Plan to boost growth. This involved optimizing kitchen systems, improving sales planning, focusing on operational excellence for guest satisfaction, introducing new core menu items, offering customization and investing strategically in promotions. Renovated restaurants are already showing impressive same-restaurant sales and returns. DRI is prioritizing technology-driven initiatives, like widespread tablet adoption, capitalizing on the digital surge in the U.S. fast-casual restaurant scene.
Emphasis on Acquisitions: On 14 Jun 2023, Darden completed the acquisition of Ruth's Hospitality Group. The acquired operations include 77 company-owned locations, with 74 franchisee-owned and four managed locations. This buyout is expected to boost Darden's net earnings per share in the fiscal 2024 by 10-12 cents, excluding acquisition and integration-related expenses.
Darden plans to integrate Ruth's Chris into its platform gradually. The company anticipates annualized net run rate synergies of approximately $25 million compared with its previous expectation of $20 million. In the fiscal 2024, the company expects net synergies to be nearly $12 million.
Digitalization to Drive Growth: The company’s off-premise sales remained consistent with the previous quarter’s levels. In second-quarter fiscal 2024, off-premise sales contributed approximately 23% to total sales at Olive Garden and 14% at LongHorn. The company has been benefiting from technological enhancements with reference to online ordering.
Image Source: Zacks Investment Research
Given the solid feedback on account of enhanced customer experience and reduced friction, the company expects off-premise sales to remain elevated for some time. The company intends to revamp its point-of-sale system to boost guest experience and manage off-premise offerings.
Cheddar's a Long-term Growth Driver: The company considers that Cheddar has significant prospects for long-term growth. It anticipates restaurant-level margins to be well in the high teens when Cheddar’s reaches 100% of the pre-COVID sales.
In the fiscal 2023, the company added eight new Cheddar restaurants out of a total of 47 new restaurant openings. For the fiscal 2024, the company anticipates a year-over-year increase in Cheddar restaurant openings.
Other Key Picks
Some other top ranked stocks from the Zacks Retail-Wholesale sector are:
The Zacks Consensus Estimate for SHAK’s 2024 sales and earnings per share (EPS) suggests increases of 15.2% and 38.3%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of ARCO have surged 42% in the past year.
The Zacks Consensus Estimate for ARCO’s 2024 sales and EPS indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 11.7% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS suggests a rise of 5% and 26.2%, respectively, from the year-ago period’s levels.
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Here's Why You Should Buy Darden Restaurants (DRI) Stock Now
Darden Restaurants, Inc. (DRI - Free Report) is likely to gain from strategic initiatives and digitalization efforts.
Shares of the company have gained 20% in the past three months compared with the Zacks Retail - Restaurants industry’s growth of 13.6%. The Zacks Rank #2 (Buy) company’s 2024 earnings and sales are likely to witness growth of 10.9% and 9.9% year over year, respectively.
Let’s delve deeper and find out the factors driving the stock higher.
Focus on Strategic Initiatives Bode Well: DRI implemented the Brand Renaissance Plan to boost growth. This involved optimizing kitchen systems, improving sales planning, focusing on operational excellence for guest satisfaction, introducing new core menu items, offering customization and investing strategically in promotions. Renovated restaurants are already showing impressive same-restaurant sales and returns. DRI is prioritizing technology-driven initiatives, like widespread tablet adoption, capitalizing on the digital surge in the U.S. fast-casual restaurant scene.
Emphasis on Acquisitions: On 14 Jun 2023, Darden completed the acquisition of Ruth's Hospitality Group. The acquired operations include 77 company-owned locations, with 74 franchisee-owned and four managed locations. This buyout is expected to boost Darden's net earnings per share in the fiscal 2024 by 10-12 cents, excluding acquisition and integration-related expenses.
Darden plans to integrate Ruth's Chris into its platform gradually. The company anticipates annualized net run rate synergies of approximately $25 million compared with its previous expectation of $20 million. In the fiscal 2024, the company expects net synergies to be nearly $12 million.
Digitalization to Drive Growth: The company’s off-premise sales remained consistent with the previous quarter’s levels. In second-quarter fiscal 2024, off-premise sales contributed approximately 23% to total sales at Olive Garden and 14% at LongHorn. The company has been benefiting from technological enhancements with reference to online ordering.
Image Source: Zacks Investment Research
Given the solid feedback on account of enhanced customer experience and reduced friction, the company expects off-premise sales to remain elevated for some time. The company intends to revamp its point-of-sale system to boost guest experience and manage off-premise offerings.
Cheddar's a Long-term Growth Driver: The company considers that Cheddar has significant prospects for long-term growth. It anticipates restaurant-level margins to be well in the high teens when Cheddar’s reaches 100% of the pre-COVID sales.
In the fiscal 2023, the company added eight new Cheddar restaurants out of a total of 47 new restaurant openings. For the fiscal 2024, the company anticipates a year-over-year increase in Cheddar restaurant openings.
Other Key Picks
Some other top ranked stocks from the Zacks Retail-Wholesale sector are:
Shake Shack Inc. (SHAK - Free Report) currently flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 80.8%, on average. Shares of SHAK have surged 24.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SHAK’s 2024 sales and earnings per share (EPS) suggests increases of 15.2% and 38.3%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of ARCO have surged 42% in the past year.
The Zacks Consensus Estimate for ARCO’s 2024 sales and EPS indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 11.7% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS suggests a rise of 5% and 26.2%, respectively, from the year-ago period’s levels.