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Darden Restaurants (DRI) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

Darden Restaurants (DRI) closed at $125.95 in the latest trading session, marking a +1.91% move from the prior day. The stock outpaced the S&P 500's daily gain of 0.74%. Meanwhile, the Dow gained 0.19%, and the Nasdaq, a tech-heavy index, added 1.11%.

Coming into today, shares of the owner of Olive Garden and other chain restaurants had gained 1.69% in the past month. In that same time, the Retail-Wholesale sector gained 4.54%, while the S&P 500 gained 3.18%.

Wall Street will be looking for positivity from DRI as it approaches its next earnings report date. In that report, analysts expect DRI to post earnings of $1.36 per share. This would mark 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 +6.22%, respectively.

It is also important to note the recent changes to analyst estimates for DRI. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

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.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.08% higher within the past month. DRI is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that DRI has a Forward P/E ratio of 19.35 right now. Its industry sports an average Forward P/E of 24.43, so we one might conclude that DRI is trading at a discount comparatively.

Meanwhile, DRI's PEG ratio is currently 1.92. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Restaurants industry currently had an average PEG ratio of 2.14 as of yesterday's close.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 92, putting it in the top 36% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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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