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Darden Raised Its Earnings Guidance for Fiscal 2018

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EPS guidance

On January 8, 2018, Darden Restaurants (DRI) raised its EPS (earnings per share) guidance for fiscal 2018 to $4.70–$4.78 from an earlier estimate of $4.45–$4.53. The new guidance represents 23.7%–25.8% growth from $3.80 in fiscal 2017.

Darden’s management expects the “Tax Cuts and Jobs Act,” which was enacted on December 22, 2017, to lower its corporate tax rates 6% for fiscal 2018. Darden stated that the resolution of other tax matters, which isn’t related to tax cuts, is expected to lower the tax rate 1.0%. The company estimated that lowering the tax rate will help it record a non-cash net tax benefit of ~$70 million in fiscal 2018.

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Management’s guidance and analysts’ estimates

Darden maintained its SSSG (same-store sales growth) and revenue growth guidance for fiscal 2018 at 2.0% and 13.0%, respectively. Analysts expect the company to post revenue of $8.09 billion in fiscal 2018—12.8% growth from $7.17 billion in fiscal 2017. They expect Darden to post an EPS of $4.63 in fiscal 2018—15.3% growth year-over-year.

Peer comparison

For the next four quarters, analysts expect Darden’s EPS to rise 17.1% to $4.94. During this period, Texas Roadhouse (TXRH), Bloomin’ Brands (BLMN), and Brinker International (EAT) are expected to post EPS growth of 16.1%, 11.2%, and 5.4%, respectively.

Next, we’ll discuss Darden’s stock performance.

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