Darden Restaurants, Inc. DRI is scheduled to report fourth-quarter fiscal 2025 results on June 20, before the opening bell.
DRI’s earnings beat the Zacks Consensus Estimate in one of the trailing four quarters and missed on three occasions, the average surprise being negative 0.9%. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Trend in Estimate Revision of DRI
The Zacks Consensus Estimate for fiscal fourth-quarter earnings per share (EPS) is pegged at $2.96, indicating an improvement of 11.7% from $2.65 reported in the year-ago quarter.
Darden Restaurants, Inc. Price and EPS Surprise
Darden Restaurants, Inc. price-eps-surprise | Darden Restaurants, Inc. Quote
For revenues, the consensus mark is pegged at $3.26 billion. The projection implies a 10.3% rise from the year-ago quarter’s reported figure.
Let us take a look at how things might have shaped up in the quarter to be reported.
Factors Likely to Shape Darden’s Quarterly Results
Darden’s fiscal fourth-quarter performance is expected to have benefited from continued brand momentum, strategic menu promotions and expanding digital capabilities. The focus on prototype optimization, investments in new restaurant formats, delivery expansion and targeted value offerings is likely to have aided the company’s performance in the to-be-reported quarter.
Strong brand activity at Olive Garden, including the return of its “Buy One, Take One” limited-time offer and the rollout of fan-favorite entrees such as Steak Gorgonzola Alfredo and Stuffed Chicken Marsala, is likely to have driven incremental traffic. At LongHorn Steakhouse, seasonal menu additions like grilled lamb chops and fire-grilled corn, alongside a focus on quality and execution, are likely to have contributed to sustained customer engagement in the fiscal fourth quarter.
Strong contributions from core casual dining brands, including Olive Garden and LongHorn Steakhouse, are likely to have aided DRI’s top line in the fiscal fourth quarter. Our model predicts revenues from Olive Garden and LongHorn Steakhouse to rise 6.2% and 9.9%, respectively, year over year to $1.4 billion and $838 million. We expect revenues from fine dining to rise 16.2% year over year to $380 million.
Increased focus on the Uber Direct partnership is likely to have aided the company’s performance in the fiscal fourth quarter. Early trends point to favorable check averages (approximately 20% higher than traditional to-go) and healthy incrementality (40-50%) without placing operational strain on restaurants.
However, inflationary headwinds, particularly a step-up in commodity and labor costs, might have weighed on margin performance in the fiscal fourth quarter. Management expects a 3% overall inflation rate for the quarter, up from 2-2.2% in the prior periods, due to higher poultry and seafood costs. Our model predicts fiscal fourth-quarter food and beverage, and labor costs to rise 9.7% and 9.9%, respectively, year over year to approximately $1 billion each.
What Our Model Says About DRI Stock
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, which is exactly the case here.
Earnings ESP for DRI: Darden has an Earnings ESP of +0.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Darden’s Zacks Rank: The company currently has a Zacks Rank #3.
Other Stocks With the Favorable Combination
Here are some other stocks from the Zacks Retail-Wholesale space that investors may consider, as our model shows that these, too, have the right combination of elements to deliver an earnings beat.
Shake Shack Inc. SHAK has an Earnings ESP of +6.74% and a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shake Shack is expected to register a 33.3% gain in earnings for the to-be-reported quarter. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 4.1%.
Brinker International, Inc. EAT currently has an Earnings ESP of +2.39% and a Zacks Rank of 3.
In the to-be-reported quarter, Brinker’s earnings are expected to increase 46% year over year. Brinker’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 24.5%.
The Cheesecake Factory Incorporated CAKE currently has an Earnings ESP of +5.16% and a Zacks Rank of 3.
In the to-be-reported quarter, Cheesecake Factory’s earnings are expected to decrease 3.7% year over year. Cheesecake Factory’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise being 15.1%.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
