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Darden (DRI) to Post Q4 Earnings: What Awaits the Stock?

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Darden Restaurants, Inc. DRI is scheduled to report fourth-quarter fiscal 2021 results on Jun 24, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 36.1%.

How Are Estimates Placed?

The Zacks Consensus Estimate for the fiscal fourth-quarter earnings is pegged at $1.80 per share, indicating growth of a whopping 245.2%, year over year. In the prior-year period, the company had reported a loss per share of $1.24.

For revenues, the consensus mark is pegged at $2,183 million, suggesting a 71.9% increase from the year-ago quarter’s figure.

Darden Restaurants, Inc. Price and EPS Surprise
Darden Restaurants, Inc. Price and EPS Surprise

Darden Restaurants, Inc. Price and EPS Surprise
Darden Restaurants, Inc. price-eps-surprise | Darden Restaurants, Inc. Quote

Let's take a look at how things have shaped up in the quarter.

Factors at Play

Darden’s fiscal fourth-quarter performance is likely to have benefited from sequential improvement in same-restaurant sales across its brands on ramped-up vaccinations and increased dining room capacity.

During the last quarter earnings call, the company issued a business update, whereby, comps at Darden declined 15.9%, 13.9%, 11.1% and up 5.4%, respectively for the week ended Feb 28, Mar 7, Mar 14 and Mar 21, 2021. Meanwhile, comps at Olive Garden for the week ended Feb 28, Mar 7, Mar 14 and Mar 21 were down 17.4%, 15.3%, 11.6% and up 5.7%, respectively. Moreover, comps at LongHorn Steakhouse were down 3.4% and up 0.3%, 18.5%, 3.8% and 23.2%, for the week ended Feb 28, Mar 7, Mar 14 and Mar 21, respectively.

Further, focus on sales-building initiatives, menu modifications, and streamlining of order pick-up process and payment methods are likely to have aided the top line during the to-be-reported quarter. Taking all into consideration, the company projects fiscal fourth-quarter total sales at $2.1 billion. The EBITDA is expected between $345 million and $360 million and diluted net earnings per share are anticipated between $1.60 and $1.70.

Meanwhile, the Zacks Consensus Estimate for sales at Olive Garden, Fine Dining, and LongHorn Steakhouse is pegged at $1,068 million, $133 million and $519 million, calling for year-over-year growth of 46.1%, 114.5% and 77.1%, respectively. In addition, the same for Other business stands at $387 million, suggesting an increase of 114.6% from the prior-year quarter.

However, rise in hourly wage rates and marketing expenses are likely to have hurt margins in the fiscal fourth quarter. This, along with dismal footfall on account of the pandemic, is expected to have affected the company’s performance during the to-be-reported quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Darden this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

Earnings ESP: Darden has an Earnings ESP of +9.75%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Yum! Brands, Inc. YUM reported strong first-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The metrics also increased year over year. The company’s adjusted earnings of $1.07 beat the Zacks Consensus Estimate of 85 cents. In the prior-year quarter, it had reported adjusted earnings of 64 cents. Quarterly revenues of $1,486 million surpassed the consensus estimate of $1,461 million. The top line also rose 17.7% year over year. This upside can be attributed to increase in sales, along with rise in franchise and property revenues.

McDonald's Corporation MCD delivered first-quarter 2021 results, with earnings and revenues outpacing the Zacks Consensus Estimate. The company reported adjusted earnings of $1.92 per share, which outpaced the Zacks Consensus Estimate of $1.81. Also, the bottom line rose 31% year over year. Quarterly revenues of $5,124.6 million topped the Zacks Consensus Estimate of $5,047 million. Moreover, the figure climbed 9% year on year. The top line benefited from increase in global comparable sales.

Starbucks Corporation SBUX posted second-quarter fiscal 2021 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The company reported adjusted EPS of 62 cents, which beat the Zacks Consensus Estimate of 52 cents. In the prior-year quarter, the company had registered adjusted EPS of 32 cents. Meanwhile, quarterly revenues of $6,668 million missed the Zacks Consensus Estimate of $6,803 million. However, the top line increased 11.2% from the year-ago quarter’s levels. This uptick was driven by growth in comparable store sales, partially offset by the unfavorable impact of Global Coffee Alliance transition-related activities.

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