15 Mar

Why Investors Are Optimistic about Darden’s Q3 2019 Earnings

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

Stock performance

Darden Restaurants (DRI) is expected to report its fiscal 2019 third-quarter earnings results on March 21. On March 14, the company was trading at $110.04, a rise of 11.3% since its announcement of its fiscal 2019 second-quarter earnings results on December 18.

Why Investors Are Optimistic about Darden’s Q3 2019 Earnings

In the second quarter, which ended on November 25, Darden posted adjusted EPS of $0.92, outperforming analysts’ expectation of $0.91. Also, during the quarter, Darden’s two main brands, Olive Garden and LongHorn Steakhouse, posted strong same-store sales growth that outperformed analysts’ expectations.

After Darden posted its second-quarter earnings results, its management raised its EPS guidance for fiscal 2019, a move that appears to have led to a rise in the company’s stock price. The strengthening of the broader equity market, with the S&P 500 Index rising 12.0% YTD (year-to-date), has also contributed to the rise in the company’s stock price.

Peer comparison

After returning 4.0% in 2018, Darden has maintained its upward momentum in 2019 as well. Since the beginning of 2019, Darden stock has risen 10.2% as of March 14. During the same period, its peers Bloomin’ Brands (BLMN), Texas Roadhouse (TXRH), and Brinker International (EAT) have returned 15.1%, -0.9%, and 0.9%, respectively. The stock price of the Consumer Discretionary Select Sector SPDR ETF (XLY) has risen 11.4% YTD.

Series overview

With Darden’s third-quarter results around the corner, in this series, we’ll be looking at analysts’ revenue and EPS estimates for it in the period. We’ll also cover its management’s guidance for fiscal 2019. We’ll end this series by looking at analysts’ recommendations and Darden’s valuation multiple. First, let’s look at analysts’ revenue expectations for the third quarter.

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