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Here’s What Drove Darden Restaurants’ Earnings in Fiscal 1Q18

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Fiscal 1Q18 EPS

In fiscal 1Q18, Darden Restaurants (DRI) posted EPS (earnings per share) of $0.95. However, removing one-time expenses, its adjusted EPS was $0.99, which represents a rise of 12.5%. The company’s fiscal 1Q18 EPS was in line with analysts’ estimates.

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EPS growth

Darden’s fiscal 1Q18 EPS growth was driven by revenue growth, share repurchases, and a lower effective tax rate. During the quarter, the company’s effective tax rate was 23.9% compared to 26.6% in fiscal 1Q17. During the last four quarters, the company has repurchased shares worth $134.6 million. By the end of fiscal 1Q18, it had approximately $370.0 million under its share repurchase program. Share repurchases reduce the number of shares outstanding, thus boosting the company’s EPS.

Peer comparisons and outlook

During the same period, Texas Roadhouse (TXRH) posted EPS growth of 12.8%, while EPS for Brinker International (EAT) and Bloomin’ Brands (BLMN) fell 12.1% and 6.7%, respectively.

For the next four quarters, analysts are expecting Darden to post EPS of $4.50, which represents a growth of 9.0% from $4.13 in the corresponding four quarters of the previous year. For fiscal 2018, Darden management set its EPS guidance at $4.38–$4.50.

Dividends

Darden has declared dividends of $0.63 per share in fiscal 2Q18. The company has paid dividends at a yield of 3.2% and a payout ratio of 56.6%. For the next three quarters, analysts are expecting Darden to pay dividends of $1.89 to take the total for fiscal 2018 to $2.52, which represents a year-over-year growth of 12.5%.

Next, let’s look at Darden’s valuation multiple.

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