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Darden (DRI) Beats on Q1 Earnings, Ups Guidance for FY17

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Darden Restaurants, Inc. (DRI - Free Report) posted mixed first-quarter fiscal 2017 results wherein though the bottom line beat the Zacks Consensus Estimate, the top line lagged the same.

Notably, this quarter marked the eighth consecutive earnings beat for the company. The company also raised its earnings guidance for full-year fiscal 2017.

Earnings and Revenue Discussion

Adjusted earnings per share were 88 cents, beating the Zacks Consensus Estimate of 83 cents by 6%. Further, earnings surged 29.4% year over year on the back of higher revenues. Adjusted earnings exclude costs related to the real estate plan implementation.

DARDEN RESTRNT Price, Consensus and EPS Surprise

 

DARDEN RESTRNT Price, Consensus and EPS Surprise | DARDEN RESTRNT Quote

Total revenue of $1.71 billion, however, marginally lagged the Zacks Consensus Estimate of $1.72 billion. However, revenues increased 1.6% year over year.

Behind the Headline Numbers

Beginning fiscal fourth-quarter 2015, Darden began reporting under four new segments: Olive Garden, LongHorn Steakhouse, Fine Dining, which includes The Capital Grille and Eddie V's, and, Other Business. The Other Business segment includes Yard House, Seasons 52, Bahama Breeze, consumer packaged goods, and franchise revenues.

The company posted comps growth of 1.3% in the quarter and witnessed an increase in sales across all its brands in the fiscal first quarter.

Sales at Olive Garden were up 1.8% year over year to $961.2 million. Meanwhile, comps increased 2% on the back of a 1.8% improvement in pricing and 1.2% growth in menu mix, somewhat offset by a 1% decline in traffic.

Sales at Fine Dining increased 0.8% to $114.2 million. However, comps at The Capital Grille and Eddie V's witnessed a decline of 1.2% and 1.7%, respectively.

Revenues from Other Business inched up 3.1% year over year to $252.7 million as comps grew 0.7% and 3.9% at Seasons 52 and Bahama Breeze, respectively. Meanwhile comps at Yard House remained flat for the quarter.

At LongHorn Steakhouse, sales were up 0.6% to $386.3 million. Comps at LongHorn Steakhouse increased 0.6% as a 1.3% decline in traffic was more than offset by a 1.8% improvement in pricing and positive menu mix of 0.1%.

Fiscal 2017 Outlook

The company raised its full-year fiscal 2017 adjusted earnings per share projection. It now expects earnings in the range of $3.87 to $3.97 per share (earlier $3.80 – $3.90 per share), which is above the current Zacks Consensus Estimate of $3.86 per share.

Meanwhile, the company continues to anticipate comps growth in the band of 1% to 2% in fiscal 2017.

Zacks Rank & Other Stocks to Consider

Darden currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Shake Shack Inc. (SHAK - Free Report) , Wingstop Inc. (WING - Free Report) and The Wendy's Company (WEN - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Shake Shack’s 2016 earnings moved up 2.3% over the last 60 days. Further, for full-year 2016, EPS is expected to grow a solid 41.8%.

The Zacks Consensus Estimate for Wendy’s 2016 earnings climbed 2.6% over the last 60 days. Moreover, the company has posted positive earnings surprise in all of the last four quarters, with an average beat of 29.01%.

Wingstop’s earnings have surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 15.46%. Further, for full-year 2016, EPS is expected to grow 17.6%.

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