On December 20, Darden Restaurants Inc. (DRI) reported second quarter 2013 earnings of 26 cents per share, in line with the Zacks Consensus Estimate but lower than the year-ago earnings of 41 cents per share. Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and the Zacks rating for the short-term and long-term outlook for the stock.
Earnings Report Highlights
Total revenue grew 7.0% from the prior-year quarter to $1,960.0 million, which surpassed the Zacks Consensus Estimate of $1,954.0 million. Combined same-store sales (comps) for the company’s three core brands -- Olive Garden, Red Lobster and LongHorn Steakhouse -- dropped 2.7%, while the same for the company's Specialty Restaurant Group nudged up 0.7%.
Earnings Estimate Revisions - Overview
Following Darden Restaurant’s second quarter results, estimate revision trend depicted a somewhat negative bias for the upcoming quarters. Let’s dig into the earnings estimate details.
Agreement of Estimate Revisions
Over the last 7 days, 6 of the 26 analysts covering the stock raised their estimates for third quarter 2013 while the same number of analysts moved their estimates downwards. The tone was more depressing for the fourth quarter, with 6 out of 25 analysts increasing their estimates and 9 analysts revising downward. For fiscal 2014, 2 out of 25 analysts upped their estimates while as many as 12 analysts moved their estimates in the opposite direction.
Over the last 30 days period, no analyst moved his/her estimate northward for upcoming quarter and fiscal 2013 as well as 2014 to reflect Darden’s cut in fiscal 2013 guidance prior to the earnings release. In fact, a great number of analysts slashed their estimates in the said period.
The analysts, by and large, are mainly disappointed with the slowdown in comps of Darden’s pivotal concepts, Olive Garden, Red Lobster and LongHorn Steakhouse as well as the failure of the promotional offers in the backdrop of a challenging macro environment. Additionally, sluggish same-restaurant traffic count and management’s conservative guidance were also concerning.
Magnitude of Estimate Revisions
The magnitude of revision for Darden has also been quite significant over the last 30 days. For the upcoming quarter, the estimate dropped by 20 cents to $1.13 while for fiscal 2013, it took a deeper plunge of 48 cents to $3.38.
Over the last seven days period, while estimate remained unchanged for the upcoming quarter, estimate for the fourth quarter of 2013 and fiscal 2014 were revised downward by a penny and nickel, respectively.