Darden Restaurants, the owner of popular sit-down restaurants such as Olive Garden and LongHorn Steakhouse, is set to announce its fiscal second-quarter earnings on Wednesday before the market opens. Here’s what you need to know:
Earnings Expectations
According to a consensus estimate gathered by FactSet from 22 analysts, Darden is expected to report a profit of $210 million for the quarter that ended in November. This would be an increase from the $188 million profit reported in the same quarter last year.
Adjusted Profit Forecast
The forecasts of 27 analysts surveyed by FactSet indicate that the adjusted earnings, which exclude one-time items, are expected to be $1.74 per share.
Revenue Projection
Based on the estimates of 21 analysts polled by FactSet, Darden is projected to generate $2.74 billion in revenue for the quarter, compared to $2.49 billion in the previous year.
Furthermore, the company’s stock price ended the quarter slightly higher than its starting point and was recently traded at $161.87.
Key Factors to Watch
Here are a few key factors that analysts are closely watching:
1. Sales Performance at Olive Garden
Analysts from RBC Capital Markets predict that Darden will outperform the broader casual dining industry in terms of sales for the second quarter. They attribute this to the return of Never Ending Pasta at Olive Garden. This limited-time offer ran for over eight weeks, one week longer than the previous year.
2. Operating Margins Expectation
UBS analysts anticipate stronger operating margins for Darden compared to market consensus. They believe this will be achieved through moderating food inflation, productivity initiatives, and deal synergies. The analysts mentioned in a recent research note that investors will be eager to see further execution on productivity initiatives, considering continued labor inflation.
3. Promotional Strategy
According to Oppenheimer analysts, Darden’s management holds the belief that the promotional environment has not significantly shifted in the past year, contrary to what some investors may perceive. They intend to approach any changes in promotions thoughtfully and strategically, rather than in a reactionary manner. Investors will be looking for confirmation if this outlook remains unchanged and whether promotions will remain steady in the latter half of the fiscal year.
