Darden Restaurants (NYSE:DRI) – How to Trade Monday’s Earnings

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Darden Restaurants (NYSE:DRI) reports earnings on Monday, Sept. 19. A look at past Darden earnings trends indicate the restaurant stock has a very good chance of impressing investors this quarter — and shares of DRI stock could pop after earnings as a result.

True, Darden hasn’t had much to celebrate recently. A double-dip recession scare pushed shares of Darden lower in July. The stock has recovered but is only up slightly since bottoming at $43 per share on Sept. 13. Investors clearly are concerned about the forthcoming report, since consumer sentiment seems to be wavering.

But Darden Restaurants had a decent earnings report for the most recently reported quarter ending May 31, 2011, when the company matched Wall Street estimates. It’s recent track record is also fairly strong against estimates:

For the current reporting period, Darden is expected to tally earnings of 78 cents per share. That is two cents per share lower than the average estimate 90 days ago. For the full year ending May 31, 2012, the company is expected to make $3.80 per share. That number increases by 13.5% in the following year to $4.81 per share.

Consumer spending during the current quarter has held up relatively well. At the same time, commodity prices have stabilized or fallen as inflation has slowed. From the surface, investors can expect the company to meet or beat current analyst expectations as a result.

Since the start of the year, shares of Darden have traded sideways. The stock is down 2.7% year to date. Since mid-July, shares have slipped 14%. At current prices, Darden trades for 12 times current fiscal-year estimates.

Over the past year, shares of Darden are flat:

It’s unlikely to expect Darden to soar dramatically or tack on double-digit gains, considering the gloomy outlook of casual dining in general. But there is the potential for a short-term trade based on the chance of an earnings surprise

The real key for how the stock will perform immediately after the news will be guidance. After its last report, the company offered strong guidance. Shares jumped more than 3% in the first day of trading after the news was released. With the stock down significantly since that time, any good news should net substantial short-term gains in the stock.


Article printed from InvestorPlace Media, https://investorplace.com/2011/09/darden-restaurants-nysedri-how-to-trade-mondays-earnings/.

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