Darden Foresees Solid 3Q - Analyst Blog
February 29 2012 - 8:15AM
Zacks
Darden Restaurants
Inc. (DRI) recently announced its projections for third
quarter fiscal 2012. Management is hopeful of seeing impressive
numbers ahead, thanks to a shift in the Lenten season, which
started during the fiscal third quarter this year but during the
fiscal fourth quarter last year, as well as a less severe winter
this year. Same-store enjoyed a respective 70 and 200 basis point
benefit from the Lenten shift and a comfortable winter.
The company now expects earnings per
share from continuing operations to remain $1.23 to $1.25 in the
third quarter of fiscal 2012. The company also projected blended
U.S. same-restaurant sales (comps) for Olive Garden, Red Lobster
and LongHorn Steakhouse to increase around 4% and blended U.S.
comps for the Specialty Restaurant Group for the third quarter to
increase approximately 6% year over year.
Individually, U.S. comps for the
third quarter are estimated to be up around 7% at LongHorn
Steakhouse, 6% at Red Lobster and 2% at Olive Garden. We believe,
Olive Garden, which was badly hit in the second quarter, responded
to the initiatives Darden took this quarter and delivered positive
comps. However, comps at Red Lobster stole the show this quarter as
its national LobsterFest feature tied to the Lenten season gained
an incremental 190 basis points due to the shift in the season.
Management expects solid earnings
growth in the second half of 2012 and estimates blended comps to
range from 2.5% to 3.0% for 2012. The company expects total sales
growth of 7.0% to 7.5% in fiscal 2012. Earnings per share guidance
from continuing operations were also reiterated at a growth of 4–7%
year over year.
Agreement - Estimate
Revisions
Following the good news, 14 out of
16 analysts increased their estimates for the upcoming quarter
while none moved southward. Estimates were upped from $1.19 to
$1.23 per share in the last 7 days.
However, on the flip side, cost
inflation will continue to foul play. Management expects beef cost
to spike 12% during the fiscal year that starts May 28, while
chicken will see a 2% rise. However, dairy prices and seafood costs
will be under control and will likely see a modest decline going
forward. Food and beverage inflation is forecast at 0.5% to
1.5%.
Darden, which competes with
Kona Grill Inc. (KONA) and Brinker
International Inc. (EAT), currently retains a Zacks #2
Rank that translates into a short-term Buy rating.
DARDEN RESTRNT (DRI): Free Stock Analysis Report
BRINKER INTL (EAT): Free Stock Analysis Report
KONA GRILL INC (KONA): Free Stock Analysis Report
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