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

Zacks Equity Research

Darden Restaurants (DRI) closed the most recent trading day at $118.93, moving +0.88% from the previous trading session. This move outpaced the S&P 500's daily gain of 0.08%. Meanwhile, the Dow lost 0.09%, and the Nasdaq, a tech-heavy index, added 0.38%.

Prior to today's trading, shares of the owner of Olive Garden and other chain restaurants had lost 3.83% over the past month. This has was narrower than the Retail-Wholesale sector's loss of 4.9% and lagged the S&P 500's loss of 3.57% in that time.

Investors will be hoping for strength from DRI as it approaches its next earnings release. The company is expected to report EPS of $1.36, up 1.49% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $2.14 billion, up 3.66% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $6.39 per share and revenue of $9.04 billion. These totals would mark changes of +9.79% and +6.22%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for DRI. These revisions typically reflect the latest short-term business trends, which can change frequently. 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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

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. Within the past 30 days, our consensus EPS projection has moved 0.01% lower. DRI is currently a Zacks Rank #3 (Hold).

Digging into valuation, DRI currently has a Forward P/E ratio of 18.45. For comparison, its industry has an average Forward P/E of 23.31, which means DRI is trading at a discount to the group.

Investors should also note that DRI has a PEG ratio of 1.83 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Retail - Restaurants industry currently had an average PEG ratio of 2.11 as of yesterday's close.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 95, putting it in the top 38% 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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