Why Darden Restaurants Inc. Stock Popped Today

What happened
Shares of Darden Restaurants (NYSE:DRI) climbed 6.7% Tuesday after the company announced stronger-than-expected quarterly results.

More specifically, for the second quarter of its fiscal 2018, Darden’s revenue a climbed 14.6% year over year to $1.88 billion — comfortably above the $1.85 billion investors were anticipating — including 11.5% growth related to its acquisition of Cheddar’s Scratch Kitchen earlier this year, and a 3.1% increase in blended same-restaurant sales from Darden’s legacy brands.

On the bottom line, that translated to 14.1% growth in adjusted (non-GAAP) earnings per diluted share to $0.73, above analysts’ consensus estimates for adjusted earnings of $0.70 per share.

Olive Garden restaurant exterior from front

So what
Darden CEO Gene Lee stated:

Our strong same-restaurant sales and new restaurant growth drove continued market share gains during the quarter. That performance, in addition to our solid earnings growth, is a result of executing on our strategy. Our teams are building guest loyalty at all of our brands through their constant focus on our back-to-basics operating philosophy, which is grounded in food, service and atmosphere.

To be sure, within its legacy brands, Darden enjoyed same-restaurant sales growth of 3% at Olive Garden, 3.8% at LongHorn Steakhouse, 3.8% at The Capital Grille, 6.8% at Eddie V’s, 2% at Yard House, and 2.5% at Bahama Breeze. Only its smaller Seasons 52 chain (with 41 locations) saw same-store sales dip, and even then, it was a modest 0.5% decline.

Now what
If that wasn’t enough, Darden also increased its expectations for the full fiscal year 2018, calling for same-restaurant sales growth of 2%, new restaurant openings of 40, and total sales growth of 13% — all near the high end of previous guidance. Management also anticipates full-year adjusted earnings per diluted share in the range of $4.45 to $4.53, up from its prior outlook range of $4.38 to $4.50.

All things considered, there was nothing to dislike about Darden’s admirable performance today, and it’s no surprise to see shares setting a fresh 52-week high in response.

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