Casual dining restaurant operator,
Darden Restaurants Inc.
) is slated to release its first-quarter fiscal 2013 results on
September 21. The current Zacks Consensus Estimate for the first
quarter is 84 cents per share on revenues of $2,036
The current Zacks Consensus Estimate for the first quarter
reflects a year-over-year growth of 7.10%.
Over the trailing four quarters, Darden's earnings surprise was
in the range of negative 2.38% to positive 0.81%, with the average
being negative 0.79%. This implies that the company has missed the
Zacks Consensus Estimate by the same magnitude over the last four
Previous Quarter Recap
Orlando, Florida-based Darden posted fourth quarter fiscal 2012
earnings from continuing operation of $1.15 per share, in line with
the Zacks Consensus Estimate but above the year-ago earnings of
$1.00 per share.
Total revenue grew 3.8% from the prior-year quarter to $2,065.6
million but fell short of the Zacks Consensus Estimate of $2,107.0
million. Combined same-store sales for the company's three core
brands, Olive Garden, Red Lobster and LongHorn Steakhouse, dropped
1.9%, partially compensated by a 2.7% growth in the company's
Specialty Restaurant Group.
An earlier Lenten season and Easter holiday this year hurt the
combined results in the fourth quarter for Olive Garden, Red
Lobster and LongHorn Steakhouse by 40 basis points (bps), out of
which Red Lobster suffered the most.
Darden continues to expect same-store sales growth for its three
core brands to be in the range of 1%-2% as well as new restaurant
openings to be in between 100 to 110 for fiscal 2013.
However for fiscal 2013, after considering the Yard House
acquisition impact, Darden boosted total sales growth guidance in
the range of 9%-10% from the previous outlook of 6%-7%, but trimmed
its earnings per share outlook to the range of 5% to 9% down from
the previous range of 8-12%.
The analysts covered by Zacks expect Darden to post earnings of
84 cents per share for the first quarter of fiscal 2013, higher
than the prior-year earnings of 78 cents. Currently, the Zacks
Consensus Estimate ranges between 78 cents to 91 cents a share.
Earnings Estimate Revisions - Overview
Ahead of the earnings release, we have noticed a slight negative
sentiment prevailing around the stock.
Agreement of Estimate Revisions
In the last 30 days, two out of the 26 analysts covering the
stock increased their estimates for the first quarter and three
reduced the same. For both fiscal 2013 and 2014, out of 21
analysts, one analyst raised the estimate and two moved
In the last 7 days, two analysts lowered the estimates for the
upcoming quarter, but none moved in the opposite direction. The
analysts have slashed the estimates considering weaker blended
same-store sales for the first quarter of 2013, particularly driven
by negative comps at Red Lobster. For fiscal 2013, one analyst
slashed the estimate and for fiscal 2014, two analysts curtailed
the estimate, but none raised the same.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the upcoming quarter inched up
by a penny in the last 30 days, to 84 cents. For both fiscal 2013
and 2014, the earnings estimates for the same period remain
unchanged at $3.84 and $4.40, respectively.
Maintain Neutral Rating
We have a long-term Neutral recommendation on Darden as it
boasts of a unique proposition driven by strong value proposition,
menu improvements, excellent unit-level execution with
differentiated brands and a balanced portfolio, which provides
stronger diversification in sales and cost synergies. Moreover, the
dilutive effect of the latest Yard House acquisition is reflected
at the current level. Darden should now reap the benefits from this
high-potential acquisition. Further, favorable food and energy
costs will also support Darden in 2013.
However, Darden has been facing challenges in recent times. The
problems regarding one of its core brands - Olive Garden, stiff
competition resulting in higher discounting rates, failure of some
promotional offers, probability of higher 2013 SG&A expenses,
slash in guidance as well as a cautious consumer spending trends
are the causes of concern.
Darden, which competes with
Panera Bread Co.
), currently retains a Zacks #3 Rank (short-term Hold rating).
DARDEN RESTRNT (DRI): Free Stock Analysis
PANERA BREAD CO (PNRA): Free Stock Analysis
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