Restaurant chain Darden Restaurants ( DRI ) will report fiscal first-quarter numbers before the market open September 20. The consensus calls for earnings of $1.22 for the quarter, up from $0.99 during the same period last year. DRI stock has appreciated 23.2% on the year.
DRI was recently trading at $118.7 down $2.23 from its 12-month high and $41.15 above its 12-month low. InvestorsObserver's Stock Score Report gives DRI a 89 long-term technical score and a 94 short-term technical score. The stock has recent support above $115 and recent resistance below $121. Of the 22 analysts who cover the stock 11 rate it Strong Buy, 1 rate it Buy, 10 rate it Hold, 0 rate it Sell, and 0 rate it Strong Sell. DRI gets a score of 75 from InvestorsObserver's Stock Score Report.
Darden has been a strong outperformer in 2018, with the stock rising sharply in reaction to a string of three consecutive better than expected quarterly reports. Last quarter the company reported year over year earnings growth of 17.8%, and if the company is able to post earnings in-line with the consensus for its most recent quarter it would translate to a 23.2% jump from the same period last year. The street is actually betting on even stronger growth, with a whisper number of $1.25, which would be a 26% year over year increase. One thing to be aware of is that the stock is priced for perfection, with a trailing P/E of 25 and a forward P/E of 19.5. With the stock up so sharply this year already, there is a decent amount of downside risk should results fail to impress the market, so traders with long positions in the stock should have a clear exit strategy in mind just in case the stock does sell off in order to lock in some of the recent gains. Analysts have an average price target of $113.28 on the stock.
Stock Only Trade
If you're looking to establish a long stock position in DRI consider buying the stock under $119. Sell if it falls below $110 or take profits if it gets to $137.
If you want a bullish hedged trade on the stock, consider a 10/19/18 100/105 bull-put credit spread for a $0.25 credit. That's a potential 5.3% return (54.9% annualized*) and the stock would have to fall 11.7% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an 10/19/18 130/135 bear-call credit spread for a $0.35 credit. That's a potential 7.5% return (78.5% annualized*) and the stock would have to rise 9.9% to cause a problem.
Covered Call Trade
If you like the stock but wish to lower your cost basis on a new position, you may want to consider a 10/19/18 $120 covered call. Buy DRI shares (typically 100 shares, scale as appropriate), while selling the 10/19/18 $120 call for a debit of $115.10, per share. The trade has a target assigned return of 4.3%, and a target annualized return of 44.4% (for comparison purposes only).