Darden (DRI) to Report Q1 Earnings: What's in the Cards?

Darden Restaurants, Inc. DRI is scheduled to report first-quarter fiscal 2023 results on Sep 22, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 1.4%.

How Are Estimates Placed?

The Zacks Consensus Estimate for the fiscal first-quarter earnings per share (EPS) is pegged at $1.56, indicating a decline of 11.4% from $1.76 reported in the year-ago quarter.

For revenues, the consensus mark is pegged at $2,469 million, suggesting a 7.1% increase from the year-ago quarter’s figure.

Darden Restaurants, Inc. Price and EPS Surprise

Darden Restaurants, Inc. price-eps-surprise | Darden Restaurants, Inc. Quote

Let's look at how things have shaped up in the quarter.

Factors at Play

Darden’s fiscal first-quarter performance is likely to have benefited from menu simplifications, unit-expansion efforts and off-premise business. This and strengthening in-restaurant execution through investments in quality, improving staffing levels and simplifying operations are likely to have aided the company’s performance in the to-be-reported quarter.

Emphasis on a robust digital platform with online ordering and other guest-facing capabilities bodes well. In fiscal 2022, the company improved its online and mobile ordering system (for Olive Garden and LongHorn Steakhouse). DRI accelerated the rollout of online and mobile ordering and payment systems across other brands. It also emphasized on developing a customer relationship management program. During the fourth quarter of fiscal 2022, digital transactions accounted for 60% of all off-premise sales and approximately 12% of Darden's total sales. With more focus on marketing and analytical capabilities (to target existing and potential guests) the momentum is likely to have persisted in the fiscal first quarter.

Solid segmental performance is likely to have supported the company’s performance in the fiscal first quarter. The Zacks Consensus Estimate for sales at Olive Garden, Fine Dining, and LongHorn Steakhouse is pegged at $1,166 million, $185 million and $606 million, suggesting year-over-year growth of 7%, 9.5% and 6.9%, respectively. The same for Other business is pegged at $521 million, indicating an increase of 8.5% from the prior-year quarter’s figure.

Elevated wage pressures and commodities inflation are likely to have hurt margins in the fiscal first quarter. This and a slowdown in consumer traffic and supply chain disruptions are expected to have affected the company’s performance in the to-be-reported quarter.

What Our Model Says

Our proven model predicts an earnings beat for Darden this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Darden has an Earnings ESP of +0.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Poised to Beat on Earnings

Here are some other stocks worth considering from the Zacks Retail-Wholesale sector, as our model shows that these have the right combination of elements to beat on earnings this season:

The Kroger Co. KR currently has an Earnings ESP of +0.21% and a Zacks Rank #2.

Shares of Kroger have increased 17% in the past year. KR’s earnings beat the consensus mark in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 15.7%, on average.

Chipotle Mexican Grill, Inc. CMG has an Earnings ESP of +1.63% and a Zacks Rank #3.

Shares of Chipotle have declined 10.1% in the past year. CMG’s earnings beat the consensus mark in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 6.2%, on average.

Restaurant Brands International Inc. QSR currently has an Earnings ESP of +1.61% and a Zacks Rank #3.

Shares of Restaurant Brands have declined 4% in the past year. QSR’s earnings beat the consensus mark in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 6.1%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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