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Darden Restaurants Inc - Stock Quote DRI

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Morningstar's Darden Restaurants Inc Stock Analysis

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Economic Moat

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Darden's Long-Term Commentary Encouraging Despite Macro, Margin Pressure; Shares Fairly Priced

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Narrow-moat Darden reported mixed third-quarter results, with revenue of $2.45 billion and diluted EPS of $1.93 slightly behind our forecasts of $2.54 billion and $2.02. Top-line pressure was unsurprising, given an omicron-induced decline in guest traffic during February, and the trifecta of sick pay, sales deleverage, and inflation was a $0.30 drag on earnings. All else equal, we take a positive view of the quarter, with revised guidance effectively suggesting a stronger fourth quarter than previously expected, while a 6% anticipated pricing increase (up from 3.7% in the third quarter) should better defray inflation. As we juggle the impacts of better-than-expected consumer demand, the removal of our prior forecast for a 5-point bump in the U.S. tax rate, and softer third-quarter results, we expect to raise our $128 fair value estimate by a mid-single-digit percentage.

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Darden Restaurants Inc's Company Profile

Business Description

Darden Restaurants is the largest restaurant operator in the U.S. casual and fine dining markets, with consolidated revenue of $7.2 billion in fiscal 2021 resulting in 3.8% market share (per Euromonitor data and our calculations). The company maintains a portfolio of eight restaurant chains: Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Eddie V’s, and Bahama Breeze. Darden generates revenue almost exclusively from company-owned restaurants, though a network of 64 franchised restaurants and consumer-packaged goods sales through the traditional grocery channel contribute modestly. As of the end of Darden's fiscal 2022 third quarter, the company owned 1,855 restaurants in the U.S.

Contact
1000 Darden Center Drive
Orlando, FL, 32837
T +1 407 245-4000
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Feb 28, 2022
Fiscal Year End May 31, 2021
Stock Type Cyclical
Employees 156,883

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