In the Offing
Revival Plan
Overall, it has been a mixed show as far as customer traffic is concerned. Going forward, the ongoing efforts to reduce costs and improve pricing should reflect more profoundly in the company’s financial results.
The stock, which maintained a steady uptrend over the years, entered 2019 on a positive note and hit a record high a few months ago. However, the trend was reversed in the following weeks and the withdrawal gathered pace after the second-quarter earnings report.
Mixed View
Analysts are divided in their recommendations for the stock, in line with the market’s mixed outlook on the company. Their price target – around $126 that represents a 17% upside – shows that the stock has the potential to rebound from the current lows and reach a new peak in 2020.
On Friday, brokerage firm Argus downgraded the stock to hold from buy, saying that profitability will be negatively impacted in the near term by rising costs and softness in comparable-store sales. The stock traded down 1% following the rating action.
Also see: Darden Q2 2020 Earnings Conference Call Transcript
In the second quarter, positive same-store performance and contributions from new stores drove up sales by 4% to $2.06 billion. As a result, earnings rose 20% year-over-year to $1.12 per share and topped the Street view. Meanwhile, sales and comparable store sales missed the estimates, driving the stock sharply lower after the announcement.
Thriving Market
Underscoring the popularity of fast-food stocks among investors, restaurant operator Chipotle Mexican Grill (CMG) gained a whopping 73% this year, partially aided by the rally that followed the company’s positive third-quarter results a few months ago.