On December 20,
Darden Restaurants Inc.
) reported second quarter 2013 earnings of 26 cents per share, in
line with the Zacks Consensus Estimate but lower than the
year-ago earnings of 41 cents per share. Below we will cover the
results of the recent earnings announcement, subsequent analyst
estimate revisions and the Zacks rating for the short-term and
long-term outlook for the stock.
Earnings Report Highlights
Total revenue grew 7.0% from the prior-year quarter to
$1,960.0 million, which surpassed the Zacks Consensus Estimate of
$1,954.0 million. Combined same-store sales (comps) for the
company's three core brands -- Olive Garden, Red Lobster and
LongHorn Steakhouse -- dropped 2.7%, while the same for the
company's Specialty Restaurant Group nudged up 0.7%.
Earnings Estimate Revisions - Overview
Following Darden Restaurant's second quarter results, estimate
revision trend depicted a somewhat negative bias for the upcoming
quarters. Let's dig into the earnings estimate details.
Agreement of Estimate Revisions
Over the last 7 days, 6 of the 26 analysts covering the stock
raised their estimates for third quarter 2013 while the same
number of analysts moved their estimates downwards. The tone was
more depressing for the fourth quarter, with 6 out of 25 analysts
increasing their estimates and 9 analysts revising downward. For
fiscal 2014, 2 out of 25 analysts upped their estimates while as
many as 12 analysts moved their estimates in the opposite
Over the last 30 days period, no analyst moved his/her
estimate northward for upcoming quarter and fiscal 2013 as well
as 2014 to reflect Darden's cut in fiscal 2013 guidance prior to
the earnings release. In fact, a great number of analysts slashed
their estimates in the said period.
The analysts, by and large, are mainly disappointed with the
slowdown in comps of Darden's pivotal concepts, Olive Garden, Red
Lobster and LongHorn Steakhouse as well as the failure of the
promotional offers in the backdrop of a challenging macro
environment. Additionally, sluggish same-restaurant traffic count
and management's conservative guidance were also concerning.
Magnitude of Estimate Revisions
The magnitude of revision for Darden has also been quite
significant over the last 30 days. For the upcoming quarter, the
estimate dropped by 20 cents to $1.13 while for fiscal 2013, it
took a deeper plunge of 48 cents to $3.38.
Over the last seven days period, while estimate remained
unchanged for the upcoming quarter, estimate for the fourth
quarter of 2013 and fiscal 2014 were revised downward by a penny
and nickel, respectively.
Decline in same-restaurant sales, anemic performance by core
concepts that almost approached saturation, stiff competition,
and high discount rates imposed on menu prices to fight the
intricate economic conditions are among the host of factors that
could pose a threat to Darden Restaurants' growth.
In fact, Darden expects the macroeconomic tension and
faltering consumer confidence to be a spot of bother for the rest
of 2013, which makes the Orlando, Florida-based company guide
softly. Although Darden resorted to several turnaround
initiatives and value messaging to beat the recent woes, we are
yet to see any sustained improvement.
Darden, which competes with
Kona Grill Inc.
Brinker International Inc.
), currently retains a Zacks #5 Rank (short-term Strong Sell
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking
discovery into two of the most celebrating stock rating systems
in use today. The Zacks Rank for stock trading in a 1 to 3
month time horizon and the Zacks Recommendation for long-term
investing (6+ months). These "Earnings Estimate Scorecard"
articles help analyze the important aspects of estimate
revisions for each stock after their quarterly earnings
announcements. Learn more about earnings estimates and our
proven stock ratings at
DARDEN RESTRNT (DRI): Free Stock Analysis
BRINKER INTL (EAT): Free Stock Analysis
KONA GRILL INC (KONA): Free Stock Analysis
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