Shares of Darden Restaurants, Inc. (DRI) hit a 52-week high of $58.99 in the first half of the trading session on Tuesday. Share price of this restaurateur has risen by 2.5% since it announced impressive second quarter fiscal 2015 results, on Dec 17.
Further, the fact that the company increased the lower end of its fiscal 2015 earnings guidance caught investors’ attention resulting in share price gain of 2% during the aftermarket trading session.
It seems Darden is slowly turning itself around after it sold the Red Lobster segment to Golden Gate Capital for $2.1 billion in cash in Jul 2014. Since the completion of the sale of Red Lobster, Darden Restaurants' shares have soared nearly 30% in just five months.
The company currently operates restaurant chains such as Olive Garden, LongHorn Steakhouse and The Specialty Restaurant Group. Darden managed to grow comps in almost all units in the second quarter. This is especially encouraging because the company’s core brand – Olive Garden has been posting negative comps for the past few quarters.
Further, the company’s decision to introduce smaller, individually portioned appetizers known as Bold Bites led to comps growth. The Bold Bites are designed to satisfy guests who seek more portion and flavor, and hence were popular among diners who increasingly prefer a more customized menu.
Darden’s earnings from continuing operations of 28 cents beat the Zacks Consensus Estimate by a penny and increased significantly year over year owing to improvement in revenues and margins. Also, earnings matched the company's projection and were at the higher end of the expected range of 26 cents to 28 cents.
Comps growth also led to revenue growth of 5% year over year and the consensus beat by 0.5%. Sales were up in almost all the company’s various units. At LongHorn Steakhouse, sales were up 8% to $346 million. Sales at Olive Garden were up 1.4% year over year to $882.0 million, whereas sales at The Specialty Restaurant Group increased 13% to $329 million.
Following such impressive results, the company increased the lower end of its earnings guidance for fiscal 2015. Earnings are expected in the range of $2.25 to $2.30 per share compared with the previous expectation of $2.22 to $2.30 per share.
It seems that Darden’s efforts to grow and develop LongHorn Steakhouse and Specialty Restaurants are yielding positive results. Moreover, the company’s Olive Garden Brand Renaissance plan that was launched to bring a turnaround in the restaurant chain’s business seems to have started reaping benefits. In fact analysts’ opinion associated with the stock is also very optimistic, with more than half of the analysts covering the stock upgrading their estimates for the current quarter.
Darden currently carries a Zacks Rank #1 (Strong Buy). Other well performing stocks in the same sector are Chipotle Mexican Grill, Inc. (CMG), El Pollo Loco Holdings, Inc. (LOCO) and Fiesta Restaurant Group, Inc. (FRGI). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment