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Darden's (DRI) Q4 Earnings to Gain Despite Cost Concerns
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Darden Restaurants, Inc. (DRI - Free Report) is set to report fourth-quarter fiscal 2018 results on Jun 21, before the opening bell.
The company, like most other restaurant operators, has been bearing the burden of high costs associated with labor, food and beverage, and other restaurant operations. Moreover, Darden is particularly susceptible to increased expenses due to its non-franchised model. However, aggressive cost-saving initiatives are likely to aid the company in expanding margins. Thus, earnings are also likely to improve as a result.
Notably, shares of Darden have gained 4.2% in the past year, outperforming its industry’s growth of 3.9%.
Bottom-Line Picture
Darden, like several other restaurant operators, is shouldering increased labor costs due to the Affordable Care Act. Moreover, sales-building strategies like greater focus on culinary innovation, restaurant remodeling and technology-driven initiatives are likely to add to the company’s expenses.
Subsequently, in the first three quarters of fiscal 2018, Darden’s total operating costs and expenses increased 14.4% year over year to nearly $5.4 billion. This was caused by an overall increase in food and beverage costs, restaurant labor and expenses, marketing, as well as general and administrative expenses. This trend is likely to have continued in the fourth quarter as well.
The Zacks Consensus Estimate for food and beverage expenses for the to-be-reported quarter is pegged at $606 million, suggesting an 8.6% year-over-year increase. Also, costs from labor and restaurant-level operation are estimated to be $684 million and $367 million, mirroring a year-over-year hike of 13.4% and 9.2%, respectively.
However, despite prevailing high cost, Darden is focusing on an aggressive cost-management plan. For fiscal 2018, the company expects 10-40 basis points year-over-year margin expansion as a result of cost savings. We believe that cost savings and increased revenues across all brands are likely to have favored its margins in the to-be-reported quarter, which in turn should have boosted earnings of the company. The consensus estimate for fourth-quarter earnings is pegged at $1.35, mirroring 14.4% year-over-year growth.
BJ’s Restaurants, Dine Brands and Wingstop’s earnings for 2018 are expected to grow 41.8%, 23.1% and 13.5%, respectively.
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Darden's (DRI) Q4 Earnings to Gain Despite Cost Concerns
Darden Restaurants, Inc. (DRI - Free Report) is set to report fourth-quarter fiscal 2018 results on Jun 21, before the opening bell.
The company, like most other restaurant operators, has been bearing the burden of high costs associated with labor, food and beverage, and other restaurant operations. Moreover, Darden is particularly susceptible to increased expenses due to its non-franchised model. However, aggressive cost-saving initiatives are likely to aid the company in expanding margins. Thus, earnings are also likely to improve as a result.
Notably, shares of Darden have gained 4.2% in the past year, outperforming its industry’s growth of 3.9%.
Bottom-Line Picture
Darden, like several other restaurant operators, is shouldering increased labor costs due to the Affordable Care Act. Moreover, sales-building strategies like greater focus on culinary innovation, restaurant remodeling and technology-driven initiatives are likely to add to the company’s expenses.
Subsequently, in the first three quarters of fiscal 2018, Darden’s total operating costs and expenses increased 14.4% year over year to nearly $5.4 billion. This was caused by an overall increase in food and beverage costs, restaurant labor and expenses, marketing, as well as general and administrative expenses. This trend is likely to have continued in the fourth quarter as well.
The Zacks Consensus Estimate for food and beverage expenses for the to-be-reported quarter is pegged at $606 million, suggesting an 8.6% year-over-year increase. Also, costs from labor and restaurant-level operation are estimated to be $684 million and $367 million, mirroring a year-over-year hike of 13.4% and 9.2%, respectively.
However, despite prevailing high cost, Darden is focusing on an aggressive cost-management plan. For fiscal 2018, the company expects 10-40 basis points year-over-year margin expansion as a result of cost savings. We believe that cost savings and increased revenues across all brands are likely to have favored its margins in the to-be-reported quarter, which in turn should have boosted earnings of the company. The consensus estimate for fourth-quarter earnings is pegged at $1.35, mirroring 14.4% year-over-year growth.
Zacks Rank & Stocks to Consider
Currently, Darden carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the U.S. restaurant space include BJ’s Restaurants (BJRI - Free Report) , Dine Brands (DIN - Free Report) and Wingstop (WING - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ’s Restaurants, Dine Brands and Wingstop’s earnings for 2018 are expected to grow 41.8%, 23.1% and 13.5%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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