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Category: Stock Market and Darden Restaurants
Date:24 December 2019 Stock Price: $110.24 We take a look at the 2nd quarter earnings release of their 2020 fiscal year of Darden Restaurants one of America's leading restaurant groups in the full-service dining space with brands such as Olive Garden and Longhorn Steakhouse
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About Darden Restaurants
The Darden family of restaurants features some of the most recognizable and successful brands in full-service dining. Through subsidiaries, we own and operate more than 1,700 restaurants, employ 185,000 people and serve nearly 400 million guests a year.
The image below shows Darden Restaurants different brands
The image below shows Darden Restaurants different brands
Overview of Darden Restaurants' 2nd quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Sales: $2.056 billion (up from $1.973 billion from the same quarter of the previous year)
- Revenues increased by 4.2% over the last 12 months
- Total Operating Costs: $1.896 billion (up from $1.825 billion for the same quarter of the previous year)
- Operating costs increased by 3.9% over the last 12 months
- Net income: $24.7 million (down from $115.6 million for the same quarter of the previous year)
- Diluted earnings per share: $0.20 (down from $0.92 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 123.7 million (down from 125.8 million for the same quarter of the previous year)
- Cash and cash equivalents: $157.3 million
- Cash and cash equivalents per share: $1.27
- Cash and cash equivalents makes up 1.15% of Darden Restaurants' market capital
- Cash and cash equivalents makes up 1.6% of Darden Restaurants' total assets
- Inventories: $212.2 million
- Inventories makes up 2.17% of Darden Restaurants' total assets
- Stockholders equity i n Darden Restaurants: $2.273 billion
- Stockholders equity per share: $18.37
- Darden restaurants is trading at 6 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
Darden Restaurants' management commentary on the results and earnings guidance
ORLANDO, Fla., Dec. 19, 2019 /PRNewswire/ -- Darden Restaurants, Inc., (NYSE:DRI) today reported its financial results for the second quarter ended November 24, 2019.
"We had a good quarter with continued same-restaurant sales growth outpacing the casual dining industry benchmarks, especially at LongHorn," said CEO Gene Lee. "We continue to see that consumers are willing to visit brands with compelling value and strong guest experiences."
Below shows the same store sales per brands:
"We had a good quarter with continued same-restaurant sales growth outpacing the casual dining industry benchmarks, especially at LongHorn," said CEO Gene Lee. "We continue to see that consumers are willing to visit brands with compelling value and strong guest experiences."
Below shows the same store sales per brands:
- +1.5% for Olive Garden
- -1.2% for Cheddar's Scratch Kitchen
- +6.7% for LongHorn Steakhouse
- +0.7% for Yard House
- +1.8% for The Capital Grille
- -3.5% for Seasons 52
- +0.5% for Eddie V's
- -3.4% for Bahama Breeze
Dividend Declared
Darden's Board of Directors declared a regular quarterly cash dividend of $0.88 per share on the Company's outstanding common stock. The dividend is payable on February 3, 2020 to shareholders of record at the close of business on January 10, 2020.
Share Repurchase Program
During the quarter, the Company repurchased approximately 1.2 million shares of its common stock for a total cost of approximately $136 million. Fiscal year-to-date, the Company repurchased approximately 2.0 million shares of its common stock for a total cost of approximately $231 million. As of the end of the fiscal second quarter, the Company had approximately $390 million remaining under the current $500 million repurchase authorization.
Fiscal 2020 Financial Outlook
The Company reaffirmed all aspects of its financial outlook for fiscal 2020:
Darden's Board of Directors declared a regular quarterly cash dividend of $0.88 per share on the Company's outstanding common stock. The dividend is payable on February 3, 2020 to shareholders of record at the close of business on January 10, 2020.
Share Repurchase Program
During the quarter, the Company repurchased approximately 1.2 million shares of its common stock for a total cost of approximately $136 million. Fiscal year-to-date, the Company repurchased approximately 2.0 million shares of its common stock for a total cost of approximately $231 million. As of the end of the fiscal second quarter, the Company had approximately $390 million remaining under the current $500 million repurchase authorization.
Fiscal 2020 Financial Outlook
The Company reaffirmed all aspects of its financial outlook for fiscal 2020:
- Total sales growth of 5.3% to 6.3%, including approximately 2% growth related to the 53rd week
- Same-restaurant sales growth of 1% to 2%
- Approximately 50 gross and 44 net new restaurant openings
- Total capital spending of $450 to $500 million
- Total inflation of approximately 2.5%
- Effective tax rate of 10% to 11%
- Adjusted diluted net earnings per share from continuing operations of $6.30 to $6.45 including*:
- Approximately $0.15 related to the addition of the 53rd week
- Approximately -$0.05 related to the implementation of ASC-842 Lease Accounting
- Approximately 124 million weighted average diluted shares outstanding
Darden Restaurants (NYSE:DRI) stock price history
The image below, obtained from Google, shows the stock price history of Darden Restaurants (NYSE: DRI) over the last 5 years. And it has been a very good time for Darden Restaurant stockholders. 5 years ago the stock of Darden was trading around $52.29 and its currently trading at $110.24. Thats a whopping 110.8% return over the last 5 years.
The stock of Darden is trading at a little closer to its 52 week low of $95.83 than it is to its 52 week high of $128.41 which to us is a clear indication that the short term sentiment and momentum of Darden's stock is negative.
The stock of Darden is trading at a little closer to its 52 week low of $95.83 than it is to its 52 week high of $128.41 which to us is a clear indication that the short term sentiment and momentum of Darden's stock is negative.
Recent coverage of Darden Restaurants
The extract below covers the latest earnings report of Darden Restaurants as obtained from TheStreet.com
Darden Restaurants (DRI) - Get Report was struggling Thursday after the parent of Olive Garden reported second-quarter same-store sales that missed analysts' estimates even as earnings beat forecasts. The company reported net income of $24.7 million, or 20 cents a share, down from $115.6 million, or 92 cents, a year earlier. Adjusted earnings of $1.12 a share beat analysts' estimates of $1.07. Revenue of $2.06 billion rose from $1.97 billion and matched estimates.
However, the bad news for the company was that same-store sales rose 2%, slightly below consensus estimates of 2.1% growth. For fiscal 2020, the company expects same-store sales growth between 1% and 2%, in line with analysts' estimates of 1.6%. “We had a good quarter with continued same-restaurant sales growth outpacing the casual dining industry benchmarks, especially at LongHorn," said CEO Gene Lee. "We continue to see that consumers are willing to visit brands with compelling value and strong guest experiences."
Read the full article here
Darden Restaurants (DRI) - Get Report was struggling Thursday after the parent of Olive Garden reported second-quarter same-store sales that missed analysts' estimates even as earnings beat forecasts. The company reported net income of $24.7 million, or 20 cents a share, down from $115.6 million, or 92 cents, a year earlier. Adjusted earnings of $1.12 a share beat analysts' estimates of $1.07. Revenue of $2.06 billion rose from $1.97 billion and matched estimates.
However, the bad news for the company was that same-store sales rose 2%, slightly below consensus estimates of 2.1% growth. For fiscal 2020, the company expects same-store sales growth between 1% and 2%, in line with analysts' estimates of 1.6%. “We had a good quarter with continued same-restaurant sales growth outpacing the casual dining industry benchmarks, especially at LongHorn," said CEO Gene Lee. "We continue to see that consumers are willing to visit brands with compelling value and strong guest experiences."
Read the full article here
Darden Restaurants (NYSE: DRI) latest stock valuation
So based on the earnings report of Darden Restaurants (NYSE:DRI) and the latest earnings guidance provided what do we value Darden Restaurants (DRI) stock at? Based on the earnings reported by the group our valuation model provides a target (full value) price for Darden Restaurants at $104.30 a stock (down slightly from our 1st quarter 2020 earnings report valuation of Darden).. We therefore believe the stock of Darden Restaurants is overvalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $104.30 Therefore we believe a good entry point into the stock would be at $93.90 or below
We expect that the stock of Darden will continue its recent downward trend in coming weeks and months to levels closer to our target price (full value price).
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $104.30 Therefore we believe a good entry point into the stock would be at $93.90 or below
We expect that the stock of Darden will continue its recent downward trend in coming weeks and months to levels closer to our target price (full value price).
Next earnings release of Darden Restaurants
It is expected that Darden Restaurants will release their 3rd quarter 2020 earnings report in late March 2020