Darden Restaurants, Inc.
) is set to report its fiscal third-quarter 2014 results on March
21, before the opening bell.
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In the last quarter, it posted a negative earnings surprise of
25.00%, primarily affected by increase in total costs and
expenses. Will Darden be able to post a turnaround? Let's see how
things are shaping up for this announcement.
Factors to Influence Fiscal Third Quarter
Darden has been reeling under pressure for quite some time now
due to weak performance of two of its core brands - Red Lobster
and Olive Garden. Although the company has undertaken a set of
initiatives such as value-proposition and promotional offers to
boost the brands, these are yet to pay off. As a result, the
company plans to separate its Red Lobster business in the near
future either through a sale or spin-off.
The company projected earnings of 82 cents for fiscal third
quarter 2014 - down 19.6% year over year - in its preliminary
results reported on Mar 3, 2014. The downside reflects lower
sales and higher direct costs due to inclement weather. Moreover,
Darden's bottom-line will also be hurt by the costs associated
with its strategic action plan announced in Dec 2013.
The company expects comps at all its chains such as Red Lobster,
Olive Garden, LongHorn Steakhouse and The Specialty Restaurant
Group to be sluggish in the quarter due to the severe winter in
the U.S. and a Thanksgiving calendar shift.
With such a bleak near-term outlook, this restaurateur failed to
impress analysts. In fact, the concern over the dwindling
popularity of its main brands forced many analysts to
significantly lower their third-quarter earnings estimates. The
Zacks Consensus Estimate for the fiscal third quarter declined
13% to 82 cents per share over the last 30 days, as almost all
brokers covering the stock pulled down their estimates.
Our proven model does not conclusively show that Darden is likely
to beat earnings this quarter. That is because a stock needs to
have both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here, as you will see below.
: The Earnings ESP for Darden is 0.00%. This is because
both the Most Accurate estimate and the Zacks Consensus Estimate
are pegged at 82 cents.
: Darden's Zacks Rank #3 (Hold) however increases the predictive
power of ESP. That said we also need to have a positive ESP to be
confident of an earnings surprise.
Other Stocks to Consider
Here are some other companies you may consider, as our model
shows they have the right combination of elements to post an
earnings beat this quarter:
) has an earnings ESP of +0.81% and carries a Zacks Rank #3.
Fiesta Restaurant Group, Inc.
) has an earnings ESP of +3.33% and carries a Zacks Rank #3.
Las Vegas Sands Corp.
) has an earnings ESP of +1.12% and carries a Zacks Rank #3.