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What Do Analysts Expect of Darden’s Earnings in Fiscal 1Q17?

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Sep. 29 2016, Updated 11:04 a.m. ET

Earnings per share

Having discussed Darden Restaurants’ (DRI) estimated revenue, sources of revenue, and estimated EBIT (earnings before interest and tax) margins, let’s now discuss analysts’ EPS (earnings per share) estimates and Darden’s management’s guidance for fiscal 2017.

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Fiscal 1Q17 estimates

In the above graph, we can see that Darden has beaten analysts’ estimates in the last four quarters. Usually, when earnings beat analysts’ estimates, a share’s price rises.

In fiscal 1Q17, analysts expect Darden to post EPS of $0.82, a rise of 20.1% from $0.68 in fiscal 1Q16. This rise in EPS should mainly be driven by Darden’s share purchases over the last 12 months, supported by revenue growth and the expansion of its EBIT margin.

Share repurchases decrease a company’s number of shares outstanding, thus increasing EPS. We’ll discuss more about share repurchases in our next article.

Peer comparison

During the same period, analysts expect the EPS of Darden’s peers Texas Roadhouse (TXRH), Bloomin’ Brands (BLMN), and Brinker International (EAT) to rise 31%, 43.6%, and -1.8%, respectively.

Outlook

The company’s management has set its EPS guidance for fiscal 2017 to $3.8–$3.9. Analysts expect Darden to post EPS of $3.86, which represents a rise of 9.7% from $3.5 in fiscal 2016. Darden’s revenue growth, expansion of its EBIT margins, and share repurchases in the last 12 months are expected to drive its EPS growth in fiscal 2017.

Next, let’s look at Darden’s dividend policy, which forms 0.14% of the holdings of the iShares Russell Mid-Cap ETF (IWR).

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