Darden Restaurants to report fiscal Q1 numbers

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What's Happening

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.

Technical Analysis

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.

Analyst's Thoughts

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.

Bullish Trade

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.

Bearish Trade

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).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com

This article appears in: Investing , Options
Referenced Symbols: DRI

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