Fiscal 3Q18 performance
Darden Restaurants (DRI) posted its fiscal 3Q18 earnings before the market opened on March 22. The company posted adjusted EPS (earnings per share) of $1.71 on revenues of $2.13 billion. Compared to fiscal 3Q17, the company’s EPS grew 29.5% while revenue rose 13.3%.
Analysts were expecting Darden to post EPS of $1.64 on revenues of $2.15 billion. Also, the company’s fiscal 3Q18 SSSG (same-store sales growth) of 2.0% was lower than analysts’ expectations of 2.5%. During the fiscal 3Q18 earnings call, the company’s management announced that it would not be offering its most popular promotion, Buy One Take One, in fiscal 4Q18. The announcement appears to have made investors skeptical about the company’s sales in fiscal 4Q18. Also, the lower-than-expected fiscal 3Q18 SSSG, increased labor expenses, and weakness in the broader equity market appear to have led to a fall in Darden’s stock price. By the end of March 22, Darden was trading at $85.94, which represents a fall of 7.9% from its previous day’s closing price.
2017 was a good year for Darden, with its stock returning 32.0%. However, since the beginning of 2018, the company’s stock price has declined 10.5%. Texas Roadhouse (TXRH), Bloomin’ Brands (BLMN), and Brinker International (EAT) have returned 9.7%, 11.1%, and -10.8%, year-to-date, respectively. Also, the broader comparative indices, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY), have returned -1.1% and 3.5%, respectively.
With Darden having posted its fiscal 3Q18 earnings, we’ll be looking at its performance versus analysts’ estimates. We’ll also cover management’s 2018 guidance and analysts’ estimates for the next four quarters. Finally, we’ll end this series by looking at the company’s valuation multiples and analysts’ recommendations.
Let’s start our analysis by looking at Darden’s fiscal 3Q18 revenue.