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Darden Restaurants, Inc. Stock (DRI) Is Your Best Restaurant Bet

A declining sector yields at least one solid long-term value play

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That company is Darden Restaurants, Inc. (DRI).

Boasting a market cap of nearly $9 billion, Darden is capable of weathering most downturns in the marketplace. Unlike the two-horse show of DineEquity, Darden is diversified across seven brands including The Olive Garden, The Capital Grill, Long Horn, Bahama Breeze, Seasons 52, Eddie V’s, and the Yard House.

As you can see, the Darden family of restaurants features some of the most recognizable names in full-service dining. Through subsidiaries, Darden owns and operates more than 1,500 restaurants, employs 150,000 people, and serves more than 320 million meals a year.

The company reported a strong fiscal 2017 second quarter, with total sales from continuing operations increasing 2.1% to $1.64 billion.

DRI’s earnings per share came in at $3.46 for the most recent quarter, representing a 28.2% increase over the past year. The company repurchased approximately $19 million of its outstanding common stock during the quarter and same-restaurant sales increased 1.7%. Broken down by brand, all brands except Seasons 52 posted sales gains in the second quarter.

Darden President and CEO Gene Lee commented, “We had another strong quarter with same-restaurant sales growth significantly outperforming the casual dining industry benchmarks, especially at Olive Garden. We remain laser-focused on our operating philosophy rooted in food, service, and atmosphere, and creating memorable experiences for our guests.”

Its recent performance shows that Darden is succeeding in meeting the needs of diners. Darden’s diversification across food styles, the stock repurchase plan, and the performance in the face of the overall downturn in the sector make it a winning pick.

Risks To Consider: The overall market is soft for casual dining. While I expect well-diversified companies to continue to thrive, the risk remains that the market may continue to suffer, bringing every concept down over the long term.

Action To Take: Sell Dine Equity if you currently own it. Risk-embracing investors may look to short the shares now. At the same time, Darden appears to be a solid, long-term buy in the $72.00 per share zone.

Editor’s Note: StreetAuthority reveals our Top 10 Stocks for making outrageous double- and possibly triple-digit gains in 2017. See the names, stories, and ticker symbols for yourself here

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Article printed from InvestorPlace Media, http://investorplace.com/2017/01/a-better-bet-in-the-declining-restaurant-sector/.

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