Earnings preview: Dining to pay-off for Darden in Q2

Darden Restaurants Inc. (DRI) is set to report its earnings for the second quarter on Tuesday before the market opens. The restaurant chain’s results could be benefited by an increase in same-restaurant sales and higher consumers traffic as well as new restaurants growth and pricing.

Analysts, on average, expect the company to post earnings of $0.91 per share on revenue of $1.98 billion for the second quarter. In comparison, during the previous year quarter, Darden reported a profit of $0.73 per share on revenue of $1.88 billion. Majority of the analysts recommended a “hold” rating on the stock with an average price target of $123.81.

The company’s results are expected to be benefited by an increase in footfall as consumers turned health conscious by shifting from fast-food chains to restaurants. The top line could be advanced by an increase in menu-mix and pricing as well as same-restaurant sales growth and new restaurants growth.

For the recent first-quarter results, Darden posted a 39% jump in earnings on higher sales and a rise in same-restaurant sales from its legacy brands. Helped by a 6.4% sales growth, Darden was able to manage the 6% rise in operating costs and expenses to a large extent. Darden posted net sales increases across all its segments during the quarter.

Darden beats Q1 sales and earnings expectations; raises outlook

Same-restaurant sales increased across most of its brands except for Cheddar’s Scratch Kitchen and Seasons 52 in the first quarter of fiscal 2019. The highest growth was in Olive Garden where same-restaurant sales rose 5.3%.

For the fiscal year 2019, the company had expected sales growth of 5% to 5.5% and EPS from continuing operations of $5.52 to $5.65. Same-restaurant sales have been predicted in the 2% to 2.5% growth range and the company is likely to open 45 to 50 restaurants during the full year.

Meanwhile, according to a survey data from Tdn2K, many brands have been lifting their menu prices throughout the year in order to offset a decline in traffic. Hurricanes have been cited as the main reason behind the decline in traffic. Consumers have been surviving the menu price increase by the strong consumer confidence plus raising wages that may motivate them to spend more in dining out.

Shares of Darden ended Friday’s regular session down 0.98% at $103.20 on the NYSE. The stock has risen over 8% in the year so far while it has fallen over 12% in the past three months.

Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips.