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Will Darden Restaurants (DRI) Gain on Rising Earnings Estimates?

Zacks Equity Research
·2 mins read

Darden Restaurants (DRI) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this owner of Olive Garden and other chain restaurants is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Darden Restaurants, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.02 per share for the current quarter, which represents a year-over-year change of -98.55%.

Over the last 30 days, the Zacks Consensus Estimate for Darden Restaurants has increased 104.94% because eight estimates have moved higher while two have gone lower.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $2.88 per share represents a change of -7.99% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Darden Restaurants. Over the past month, 10 estimates have moved higher compared to two negative revisions, helping the consensus estimate increase 19.8%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Darden Restaurants currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Darden Restaurants shares have added 9.3% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.


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