Analysts’ EPS expectations

For the fourth quarter of 2019, analysts expect Darden Restaurants (DRI) to post adjusted EPS of $1.73, a rise of 24.2% from $1.39 in the corresponding quarter of fiscal 2018.

Darden’s revenue growth, EBIT margin expansion, lower effective tax rate, and share repurchases are likely to drive its EPS in the fourth quarter.

Why Analysts Are Expecting Darden’s EPS to Rise in Q4

Analysts expect Darden’s EBIT margin to expand from 10.9% in the fourth quarter of fiscal 2018 to 11.3% in the fourth quarter of fiscal 2019. Sales leverage from positive SSSG (same-store sales growth) and lower SG&A (selling, general, and administrative) expenses as a percentage of total revenue are expected to improve the company’s EBIT margin. Analysts expect Darden’s effective tax rate for the quarter to come in at 11.0% compared to 20.4% in the fourth quarter of fiscal 2018.

In the first three quarters of fiscal 2019, Darden repurchased 1.6 million shares for ~$166.0 million. By the end of the third quarter, the company had $345.7 million still available under its share repurchase program.

Peer comparison

During the comparable quarter, Bloomin’ Brands (BLMN), Texas Roadhouse (TXRH), and Brinker International (EAT) posted EPS changes of 5.6%, -7.9%, and 16.7%, respectively.

For 2019, Darden’s management expects its EPS to be in the range of $5.76–$5.80, which represents a rise of 19.8%–20.6% from $4.81 in fiscal 2018.

Dividends

On March 21, Darden announced a quarterly dividend of $0.75 per share at an annualized payout of $3.00 per share. On June 14, the company’s dividend yield stood at 2.51%, with its stock trading at $119.68. On the same day, the dividend yields of its peers Bloomin’, Texas Roadhouse, and Brinker stood at 2.01%, 2.21%, and 3.84%, respectively.

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