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What to look for when Darden Restaurants (DRI) reports Q3 earnings

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The American restaurant industry has almost returned to normal now, after months of disruption that made people stop eating out and choose home delivery. The companies are currently busy enhancing customer experience through various measures including menu innovation and the use of technology for more efficient food delivery.  When Darden Restaurants, Inc. (NYSE: DRI) reports earnings next week, the market will be closely following the event looking for new updates on the industry.

Valuation

Shares of the Orlando-headquartered company, which owns popular brands like Olive Garden and Longhorn Steakhouse, are currently trading close to the record highs they reached more than two years ago. Though the stock experienced fluctuation after starting the year on a high note, all along it maintained an uptrend.


Read management/analysts’ comments on quarterly reports


At the current price, Darden Restaurant’s stock is not cheap but it remains an attractive investment option. After regular dividend hikes over the years, DRI currently offers an impressive yield of 3.3%, which is good news for long-term investors looking for regular income.

Q3 Report Due

The company is scheduled to publish third-quarter results on March 23, before markets open. It has a long history of delivering better-than-expected quarterly numbers, a trend that is estimated to have continued in the latest quarter. Experts predict a 17% growth in earnings to $2.23 per share in the February quarter. The revenue estimate is $2.73 billion, up 11.6%.

From Darden Restaurants’ Q2 2023 earnings call:

“We continue to believe that the investments we made in Olive Garden will continue to pay off over time. And their staffing levels are back to where they were pre-COVID. There are improvements that they’ve made since pre-COVID in their food. And then finally, Olive Garden, California last year was a big jump for us, and we have a lot of restaurants in California, maybe there wasn’t as much across the industry. And so, that’s why we believe that our gap to the industry got better from Q1 to Q2, even though it was positive in Q1.”

Financials

In the second quarter, both earnings and revenues topped expectations, after falling in line with estimates in the preceding quarter. A 9% revenue growth at the core Olive Garden business, combined with higher sales at all other divisions, drove up the top line to about $2.50 billion. Same-store sales growth recovered after decelerating in the early months of the fiscal year. At $1.52 per share, net earnings were up 3%.


Key takeaways from McDonald’s Q4 2022 earnings report


For some time, the stock has been trading well above its 52-week average, even after a temporary dip that followed the last earnings release. DRI ended Friday’s trading down 1.24%

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