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Darden Restaurants (DRI) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, Darden Restaurants (DRI) closed at $121.23, marking a +0.58% move from the previous day. This move lagged the S&P 500's daily gain of 1.1%. Meanwhile, the Dow gained 1.05%, and the Nasdaq, a tech-heavy index, added 1.32%.

Prior to today's trading, shares of the owner of Olive Garden and other chain restaurants had lost 2.48% over the past month. This has was narrower than the Retail-Wholesale sector's loss of 5.1% and the S&P 500's loss of 5.05% in that time.

Investors will be hoping for strength from DRI as it approaches its next earnings release. On that day, DRI is projected to report earnings of $1.36 per share, which would represent year-over-year growth of 1.49%. Meanwhile, our latest consensus estimate is calling for revenue of $2.14 billion, up 3.66% from the prior-year quarter.

DRI's full-year Zacks Consensus Estimates are calling for earnings of $6.39 per share and revenue of $9.04 billion. These results would represent year-over-year changes of +9.79% and +6.23%, respectively.

Investors should also note any recent changes to analyst estimates for DRI. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. DRI is currently sporting a Zacks Rank of #2 (Buy).

Investors should also note DRI's current valuation metrics, including its Forward P/E ratio of 18.87. For comparison, its industry has an average Forward P/E of 22.87, which means DRI is trading at a discount to the group.

Also, we should mention that DRI has a PEG ratio of 1.87. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DRI's industry had an average PEG ratio of 2.33 as of yesterday's close.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 105, which puts it in the top 42% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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