Darden Restaurants (NYSE: DRI) operates
about 1,700 casual dining restaurants in the United States and Canada. Its Red Lobster (seafood), Olive Garden (Italian cuisine), LongHorn Steakhouse (steak), Bahama Breeze (Caribbean items) and Capital Grille (steak) chains cater to families, with mid-priced menu items and generally suburban locations. A small group of Seasons 52 restaurants feature a casual grill and wine bar concept. Brinker International (NYSE: EAT) and Chipotle Mexican Grill (NYSE: CMG) are competitors.
The company pleased investors last week, when it reported fiscal Q3 EPS of 85 cents and revenues of $1.81 billion. Analysts had been looking for 82 cents and $1.80 billion. Management also guided FY08 EPS to about $2.71-$2.76 ($2.72 consensus) and FY08 revenues to about $6.63-$6.68 billion ($6.64B consensus). Raymond James subsequently upgraded the shares to "strong buy".
The stock
popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with three "strong buys", six "buys", six "holds" and one "sell". The DRI P/E ratio (13.59), PEG ratio (1.09), Price to Sales ratio (0.78), Price to Book ratio (3.72), Price to Cash Flow ratio (8.23), Sales Growth rate (24.98%), Return on Assets (9.25%), Return on Investment (13.35%) and Return on Equity (28.65%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 78% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $20.89 and $47.60. A stop-loss of $29.10 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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Reader Comments (Page 1 of 1)
4-02-2008 @ 1:16PM
katie said...
Ok, I know how they brought their stock price share up. They cut portions. Yesterday for luch I got 1 iced tea, a small piece(about a fist size) piece of chicken parm, a bowl of soup and about 1 1/2 cups of pasta. Cost about $16 dollars for lunch. Will think twice about those prices again. In Kirkland, Wa-goodbye