Irene Could Spoil Darden's Party - Analyst Blog
08 Settembre 2011 - 6:39PM
Zacks
Orlando, Florida-based Darden Restaurants Inc
(DRI) recently announced that Hurricane Irene will likely impact
its first quarter 2012 earnings by 2 cents and same-store results
at Red Lobster, Olive Garden and LongHorn Steakhouse restaurants by
20 to 30 basis points.
The Zacks Consensus Estimate for the first quarter of 2012 is
pegged at 87 cents per share. The company will report its first
quarter 2012 earnings on September 28.
Darden expects earnings per share from continuing operations of
78 cents during the quarter ended August 28. The company expects
combined same-restaurant sales for its three core brands, Olive
Garden, Red Lobster and LongHorn Steakhouse to increase 2.8% for
the period.
The U.S same restaurant sales at Red Lobster, Longhorn
Steakhouse and Specialty Restaurant Groups are estimated to
escalate 10.7%, 4.8% and 5.1%, respectively, in the first quarter
of 2012. However, comparable restaurant sales at Olive Garden are
expected to plunge 2.9%.
Darden has also trimmed its earnings per share growth outlook
for 2012. The company now expects earnings per share growth toward
the lower end of its previously announced range of 12% to 15%.
However, the company raised its overall sales growth by 0.5% to
6.5%-7.5%, due to an increase in blended same-store sales growth
estimate for its three core brands to 3% from its earlier forecast
of 2.5%. The company retained its 80 to 90 net new restaurants'
goal for fiscal 2012.
To boost shareholder value, Darden also raised its share
repurchase target for 2012 to $450 million-$500 million from its
previous target of $350 million to $400 million. Darden’s
management actively manages its capital and returns much of its
free cash to shareholders through share repurchases and dividends.
Moreover, in fiscal 2012, management intends to pay out
approximately $225 million in dividends to shareholders.
We believe that the upcoming quarter will also be affected by
food cost pressure. However, in the second half of 2012, the
company expects cost inflation to minimize. Darden also continues
to register improving blended comparable restaurant sales at all
other brands and business at its core brand - Olive Garden is also
progressing.
Darden holds a Zacks #3 Rank (short-term Hold rating). We also
reiterate our long-term Neutral recommendation on the stock. The
company faces stiff competition from peers like Brinker
International inc. (EAT) and Red Robin Gourmet
Burgers Inc. (RRGB).
DARDEN RESTRNT (DRI): Free Stock Analysis Report
BRINKER INTL (EAT): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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