Darden Restaurants, renowned for its popular dining establishments like Olive Garden and LongHorn Steakhouse, is poised to unveil its fiscal third-quarter results next week. Analysts at Deutsche Bank have offered insights indicating that the company may fall short of Wall Street's expectations, driven by current trends within the restaurant industry. The brokerage has adjusted its earnings estimate for Darden's third quarter down to $2.78 per share, a decrease from its previous estimate of $2.83.
This is notably below the consensus forecast supplied by Deutsche Bank, which stands at $2.80. Furthermore, projections for same-store sales growth have been moderated to a mere 1% year-over-year increase, a significant drop from the earlier expectation of 2.4%. In comparison, the consensus anticipates a 1.9% increase, which is less than the second-quarter growth rate of 2.4%. Lauren Silberman, an analyst at Deutsche Bank, cited disappointing industry trends observed in January and February as key factors contributing to the anticipated quarterly miss.
However, she is optimistic about the potential for improved sales moving forward, as sales figures are showing signs of recovery through the current quarter. Darden appears to be on a strategic path with enhanced advertising that focuses on value, alongside the contributions from its partnership with Uber.
These strategies may ignite sales momentum for Olive Garden as they implement a more aggressive marketing approach. Looking ahead, Darden is expected to reaffirm its adjusted earnings per share (EPS) guidance for the full year, estimated between $9.40 and $9.60. Deutsche Bank has slightly adjusted its 2025 earnings estimate to $9.50, down from $9.52, aligning closely with FactSet's consensus forecast of $9.49 on a non-GAAP basis, marking an increase from the previous year's result of $8.88. In her analysis, Silberman expresses that Darden might present a favorable investment opportunity heading into 2025.
Citing improved visibility into comparable sales reacceleration and potential positive drivers from the expanded Uber partnership, she believes that the company has a strong potential for growth and recovery. Investors are advised to keep a close eye on Darden’s performance and strategic initiatives as the restaurant industry navigates through evolving consumer behaviors and competition in the dining sector.
With a share price currently at $191.21, reflecting a change of -4.32, or a percentage drop of -2.21, the financial landscape remains dynamic and intriguing for stakeholders in this pivotal period of the fiscal year..