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Darden’s Stock Rose despite Weak Fiscal 2020 Guidance

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Fourth-quarter performance

Darden Restaurants (DRI) reported its fourth-quarter earnings on June 20. The company reported an adjusted EPS of $1.76 on revenues of $2.23 billion. The company’s adjusted EPS rose 26.6% year-over-year, while its revenues rose 4.5%.

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Stock performance

During the fourth quarter, Darden outperformed analysts’ EPS expectation of $1.73 by 1.7%. However, the company’s revenues fell short of analysts’ estimate of $2.24 billion. Darden’s overall SSSG was 1.6% lower than analysts’ expectation of 2.3%. After reporting the fourth-quarter earnings, Darden’s management provided the EPS guidance for fiscal 2020 at $6.30–$6.45, which was lower than analysts’ expectation of $6.46. The weak fourth-quarter sales and lower-than-expected fiscal 2020 guidance caused the company’s stock price to fall to a low of $112.50 on June 20—a fall of 4.2% from the previous day’s closing price. However, the company’s stock price recovered later in the day and closed at $118.67—1.1% higher than the previous day’s closing price.

YTD performance

Darden has returned 18.8% YTD (year-to-date). The company has outperformed the broader equity market. The S&P 500 Index has risen 17.8%. During the same period, Bloomin’ Brands (BLMN) has returned 2.7%. Texas Roadhouse (TXRH) and Brinker International’s (EAT) stock prices have fallen 11.2% and 13.1%, respectively.

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