By the end of June 7, Darden Restaurants (DRI) was trading at $91.40, 0.5% higher than its closing price the day prior. SunTrust Robinson Humphrey’s upgrade appears to have boosted investors’ confidence, supporting the company’s stock price.
Year-to-date stock performance
After posting a strong 32.0% return in 2017, Darden has struggled this year. Year-to-date, its stock has fallen 4.8%. In its last reported quarter (fiscal Q3 2018), the company posted adjusted EPS of $1.71 on revenue of $2.13 billion. Analysts were expecting the company to post EPS of $1.64 on revenue of $2.15 billion. The company’s SSSG (same-store sales growth) was 2.0%, missing analysts’ estimate of 2.5%. Although Darden beat analysts’ EPS estimates, its stock price fell due to lower-than-expected SSSG and Darden’s announcement that it would not be offering the company’s most popular promotion, Buy One Take One, in the fourth quarter.
In comparison, peers Texas Roadhouse (TXRH), Bloomin’ Brands (BLMN), and Brinker International (EAT) have returned 20.9%, -0.5%, and 21.8%, this year, respectively. Meanwhile, the broader comparative S&P 500 (SPX) and the Consumer Discretionary Select Sector SPDR ETF (XLY) have returned 3.6% and 11.1%.
Analysts’ estimates and valuation
In the next four quarters, from fiscal Q4 2018 to fiscal Q3 2019, analysts expect Darden to post revenue of $8.4 billion, which represents 5.9% growth year-over-year. During the same period, the company’s EPS are expected to rise 12.4% YoY to $5.18.
As of June 7, Darden had a forward PE multiple of 16.9x, while peers Texas Roadhouse, Bloomin’ Brands, and Brinker International had PE multiples of 25.1x, 14.5x, and 12.7x, respectively.