15 Mar

What Analysts Expect from Darden’s EPS in Q3 2019

WRITTEN BY Ralph Nathan FEATURED IN Pre-Release Earnings Reports and Consumer Discretionary

Analysts’ expectations

For the third quarter of fiscal 2019, analysts expect Darden Restaurants (DRI) to post adjusted EPS of $1.74, which represents a rise of 2.0% from $1.71 in the corresponding quarter of fiscal 2018. Revenue growth, the expansion of its EBIT (earnings before interest and tax) margin, and share repurchases are likely to drive the company’s EPS in the third quarter.

What Analysts Expect from Darden’s EPS in Q3 2019

During the quarter, analysts expect Darden’s EBIT margin to expand from 11.3% in the third quarter of fiscal 2018 to 11.6%. The expansion in its EBIT margin is likely to be driven by higher gross margins and lower SG&A (selling, general, and administrative) expenses. However, higher D&A (depreciation and amortization) expenses are expected to offset some of the expansion in its EBIT margin.

From the beginning of the fourth quarter of fiscal 2018 until the end of the second quarter of fiscal 2019, the company repurchased 1.18 million shares for $119.5 million. By the end of the second quarter of fiscal 2019, the company had the authorization to repurchase 192.3 million shares under its current and previous repurchase programs.

However, the increase in the company’s effective tax rate is expected to offset some of the growth in its EPS. Analysts expect Darden’s third-quarter effective tax rate to be 11.9% compared to 4.4% in the corresponding quarter of the previous year.

Peer comparison and outlook

During the same period, Texas Roadhouse (TXRH), Bloomin’ Brands (BLMN), and Brinker International (EAT) posted EPS fluctuations of 5.0%, -26.8%, and 2.3%, respectively.

In fiscal 2019, Darden’s management expects its EPS to be in the range of $5.60–$5.70. In the same period, analysts expect the company’s adjusted EPS to be $5.69, which represents a rise of 18.4% from $4.81 in fiscal 2018.

Dividends

On December 12, Darden’s management announced a quarterly dividend of $0.75 per share at an annualized payout of $3.00 per share. As of March 14, the company’s dividend yield stood at 2.7%, with its stock price trading at $110.04. On the same day, the dividend yields of Texas Roadhouse, Bloomin’ Brands, and Brinker International stood at 2.03%, 1.94%, and 3.4%, respectively.

Next, let’s look at analysts’ recommendations for Darden.

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