Traffic Lifts Darden's Expectations - Analyst Blog

Darden Restaurants, Inc. (DRI), one of the world’s largest casual dining restaurant operators, recently lifted its earnings guidance on the heels of improving sales trends and traffic.
 
The owner of the Red Lobster and Olive Garden chains said that it now expects fiscal year 2010 earnings per share to rise between 5% and 8% from $2.65 delivered in fiscal year 2009. This translates into a profit range of $2.78 to $2.86 per share for fiscal 2010. Currently, the Zacks Consensus Estimate for fiscal 2010 is $2.79. Earlier, Darden expected an earnings growth range of flat to 4%.
 
Darden expects comparable-restaurant sales to decline 3% in fiscal year 2010, and plans to open 50 to 55 net new restaurants in the year, drastically down from 71 restaurants opened in the last fiscal year. Given the economic conditions, we believe it is wise to take steady steps, rather than getting aggressive.
 
Darden forecasted third-quarter 2010 earnings in the range of 91 cents to 93 cents a share. The current Zacks Consensus Estimate for third quarter 2010 is 93 cents. Over the last 30 days, the Zacks Consensus Estimate has shown a sharp rise of 16.3% with 2 out of 25 analysts covering the stock, raising their estimates substantially. In terms of earnings surprise history, Darden’s quarterly earnings in the last four quarters have outperformed the Zacks Consensus Estimate by 2.4% - 17.7% with the four-quarter average being 6.9%.
 
Orlando, Florida-based company, Darden, expects comparable-restaurant sales between down 0.5% and up 0.5%. By concepts, comps are expected to rise 1% to 1.5% at Olive Garden and 0.5% to 1% at LongHorn Steakhouse, and are expected to fall in the range of 1% to 1.5% at Red Lobster and 2.5% to 3% at The Capital Grille.
Read the full analyst report on "DRI"
Zacks Investment Research