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Darden (DRI) Hits 52-Week High: What's Driving the Stock?


Trades from $3

Shares of the world’s largest casual dining restaurant chain, Darden’s Restaurants, Inc. (DRI - Free Report) hit a 52-week high of $74.47 on Nov 22. However, the company closed the day’s trading a trifle lower at $74.00. Notably, year to date, the stock has returned over 16%.

Last month, Darden reported mixed fiscal first-quarter 2017 results. The bottom line beat the Zacks Consensus Estimate by 6%, while the top line marginally lagged the same.

The reported quarter marked the company’s eighth consecutive earnings beat, with an average positive surprise of 9.32% in the trailing four quarters. The company achieved positive comps growth and witnessed increase in sales in all of its four reporting segments, thereby upping its earnings guidance for the full-year fiscal 2017.

Meanwhile, the stock’s prospects are further exemplified by the ongoing upward estimate revisions. Current quarter estimates and current fiscal year estimates have moved north by 1.6% and 1.3% respectively, over the past 60 days.

DARDEN RESTRNT Price and Consensus

Darden’s Brand Renaissance Plan, launched to boost the performance of its Olive Garden brand, has been reaping significant returns. The company has implemented a set of initiatives including simplifying kitchen systems, improving sales planning and scheduling, bettering guest experience, developing new core menu items, allowing customization and making smarter promotional investments. All of these, coupled with technology-driven moves, are likely to foster the company’s growth further.

However, rising labor costs and a non-franchised business model might dampen the company’s profits, while a soft consumer spending environment could keep comps under pressure. Moreover, losing out in terms of international presence like other restaurateurs such as Yum! Brands, Inc. (YUM - Free Report) , McDonalds Corporation (MCD - Free Report) and Papa John’s International, Inc. (PZZA - Free Report) could also dent revenue growth.

For all these reasons and more, Darden was recently upgraded to a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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