Darden Meets Q1 Earnings Estimates, Raises EPS View

At LongHorn Steakhouse, sales rose 6.4% to $412.6 million. Comps at LongHorn Steakhouse increased 2.9%, down from comps growth of 3.1% in the fiscal first quarter. Traffic decreased 0.1% while pricing and menu mix grew 1.7%, and 1.3%, respectively.

In the reported quarter, comps at Cheddar's decreased 4%, same as the prior quarter’s decline.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise

Darden Restaurants, Inc. Price, Consensus and EPS Surprise | Darden Restaurants, Inc. Quote

Operating Highlights & Net Income

In the fiscal second quarter, total operating costs and expenses increased 4.1% year over year to $1,825.3 million. The upside was driven by an overall increase in food and beverage costs, and restaurant expenses. Operating margin in the reported quarter expanded 70 basis points (bps) on a year-over-year basis.

Net earnings in the fiscal second quarter were $115.6 million, recording 36.5% growth from the year-ago level.

Balance Sheet

Cash and cash equivalents as of Nov 25, 2018, totaled $139.7 million, up from $146.9 million as of May 27, 2018.

Inventories totaled$209.4 million at the end of the reported quarter. Goodwill, as a percentage of total assets, was 21.3% in the quarter.

Long-term debt as of Nov 25, 2018, was $927.1 million, up from $926.5 million as ofMay 27, 2018.

During the fiscal second quarter, the company repurchased approximately 0.6 million shares of its common stock for roughly $61 million. The company still has $419 million remaining under the current $500-million repurchase authorization.

Fiscal 2019 Outlook

For fiscal 2019, the company still expects total revenues of 5-5.5%. Comps are projected to increase 2.5% compared with 2-2.5% mentioned previously. Darden’s diluted earnings per share are anticipated to be $5.60-$5.70, up from $5.52-$5.65 mentioned initially.

Zacks Rank & Other Stocks to Consider

Currently, Darden carries a Zacks Rank #2 (Buy).

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