Darden Restaurants (NYSE:
), which is trading near a multiyear high, is scheduled to report
its first-quarter fiscal 2013 results Friday, August 21 before
market open. Investors will be looking to see whether the fortunes
of the Olive Garden chain have improved and the company can build
on four-straight revenue increases.
Analysts on average predict that Darden will report per-share
earnings of $0.84 for the quarter, as well as about $2.0 billion in
revenue. In the same period of last year, the company reported a
profit of $0.78 per share and $1.9 billion in revenue. The
consensus earnings per share (
) estimate has not changed in the past 60 days. And Darden has not
fallen short of analysts' expectations in the past eight quarters.
Fourth-quarter EPS were in line with the consensus estimate.
The company attributed a fourth-quarter revenue miss on, among
other things, weak same-store sales at its Olive Garden chain and
"unusually high seafood cost inflation." CEO Clarence Otis, Jr.
warned, "the business environment in fiscal 2013 will be similar to
that in fiscal 2012." However, the board increased the quarterly
dividend by 16 percent. Darden's share price slipped about 1.7
percent in the days following the report.
Looking ahead to the current quarter, the consensus forecast
calls for year-over-year growth of both EPS and revenue. And so
far, analysts expect full-year per-share earnings growth of about
6.7 percent, as well as for revenue to be about 9.3 percent higher
than in the previous year.
Darden Restaurants operates approximately 2,000 restaurants
under the Red Lobster, Olive Garden, LongHorn Steakhouse, Capital
Grille and other banners. It is an S&P 500 component
headquartered in Orlando, Florida, and it has with a market
capitalization of more than $7 billion. It was founded in 1968, and
Clarence Otis Jr. has been the chief executive since 2004.
Competitors include Brinker International (NYSE:
), operator of the Chilis Grill & Bar and Maggiano's Little
Italy chains, and DineEquity (NYSE:
), parent of Applebee's and International House of Pancakes. For
the current quarter, the Brinker is expected to post modest
year-over-year EPS and revenue growth, while lower EPS and sales
are anticipated from DineEquity.
During the three months that ended in August, Darden saw two new
board members, tested combo Olive Garden/Red Lobster locations and
acquired Yard House USA, a 40-restaurant chain featuring
contemporary American cuisine.
Darden's long-term EPS growth forecast is almost 12 percent. The
price-to-earnings (P/E) ratio is lower than the industry average,
and the return on equity is more than 25 percent. The company has a
dividend yield of about 3.7 percent. Short interest is less than
seven percent of the float. Of 30 analysts surveyed by
Thomson/First Call who follow the stock, 18 rate the shares at Buy
or Strong Buy. But note that their mean price target, a sign of
where they expect the share price to go, is about the same as the
current share price. A good earnings report may prompt some price
The stock has risen nearly 23 percent since the beginning of the
year, including an increase of about three percent in the past
week. The share price is above both the 50-day and 200-day moving
averages. Over the past six months, though, the stock has
underperformed Brinker and DineEquity.
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