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Olive Garden & Fine Dining to Drive Darden's (DRI) Q3 Earnings

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Darden Restaurants, Inc. (DRI - Free Report) is scheduled to report third-quarter fiscal 2020 results on Mar 19. In the last reported quarter, the company delivered a positive earnings surprise of 4.7%. Notably, the company has a trailing four-quarter positive earnings surprise of 2.7%, on average.

Estimate Revision

The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at $1.87, down by a penny in the past seven days. This indicates an improvement of 3.9% from $1.80 per share in the year-ago quarter. The consensus mark for revenues is pegged at $2,322 million, suggesting growth of 3.4% from the prior-year quarter.

Factors to Note

Robust performance of Darden’s Olive Garden, Fine Dining, LongHorn Steakhouse and Other business is likely to get reflected in the fiscal third-quarter results. The Zacks Consensus Estimate for sales at Olive Garden, Fine Dining and LongHorn Steakhouse is pegged at $1,156 million, $190 million and $507 million, indicating growth of 2.3%, 8.9% and 4.9% year over year, respectively. Moreover, the same for Other segment stands at $479 million, suggesting growth of 4.4% from the prior-year quarter.

Olive Garden’s second-quarter fiscal 2020 marked 21st consecutive quarter of positive comps and the trend is likely to have continued in the to-be-reported quarter. The company’s focus on strengthening its in-restaurant execution through investments in quality and simplification of operations is likely to have driven the fiscal third-quarter performance.
However, high labor costs are likely to have weighed on the company’s margin in the quarter to be reported. Further, the non-franchised model makes it susceptible to increased expenses.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise


What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Darden Restaurants this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

The company has an Earnings ESP of -0.17% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Chipotle Mexican Grill, Inc. (CMG - Free Report) reported fourth-quarter 2019 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. The company’s adjusted earnings of $2.86 per share beat the Zacks Consensus Estimate of $2.74. The bottom line also improved 66.3% from the year-ago quarter, driven by increased revenues and strong operating margins. Quarterly revenues of $1.4 billion outpaced the consensus mark by 2.7% and improved 17.6% year over year.

Starbucks Corp. (SBUX - Free Report) reported mixed first-quarter fiscal 2020 results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. In the quarter under review, adjusted earnings of 79 cents per share beat the consensus mark of 76 cents and improved 5.3% on a year-over-year basis. Total revenues came in at $7,097.1 million, marginally missing the Zacks Consensus Estimate of $7,100 million.

McDonald's Corp. (MCD - Free Report) reported fourth-quarter 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate after missing the same in the preceding quarter. Adjusted earnings came in at $1.97 per share, which beat the consensus mark by a penny. However, the bottom line was flat with the prior-year quarter figure. In the fourth quarter, revenues of $5,349 million beat the Zacks Consensus Estimate of $5,300 million. Moreover, the figure improved 4% year over year.

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