Unlimited soup, salad and breadsticks should be more than enough reason for everyone to love Darden Restaurants’ (NYSE:DRI) Olive Garden, but idealism gave way to reality Tuesday as DRI cut next fiscal year’s outlook, with the iconic American Italian eatery shouldering much of the blame.
Darden Restaurants — which also includes national brands Red Lobster and LongHorn Steakhouse — announced it was lowering its EPS expectations, last made in September, from gains of 12%-15% to an increase of 4%-7% for FY12. The company also slightly lowered its revenue expectations.
CEO Clarence Otis said Darden is spending money to help Olive Garden regain its status among value-oriented sit-down restaurants. Olive Garden and Darden’s other restaurants — much like the rest of the country — have continued to feel the pain from rising food costs. Darden Restaurants stock dropped more than 12% on the news to $41.82, nearing a two-month low.
Getting a much-needed shot in the arm Tuesday was oil tanker company Frontline (NYSE:FRO), which gained almost 20% after announcing plans to restructure itself. According to Barron’s, Frontline will “shift some debt and assets to a new entity, allowing the core company to move forward without as much of a debt burden.”
Frontline has had a ruinous 2011 that watched FRO stock lose 85% of its value year-to-date, including a 41% drop Nov. 22 on an earnings miss and a report that the company might run out of cash by 2012. Of course, Frontline stock hasn’t been alone in its plummet, but has paced other sector rivals like Ship Finance International (NYSE:SFL, -44% year-to-date) and Teekay (NYSE:TK, -16% YTD).
- Orbitz Worldwide (NYSE:OWW): Up 13.68% (48 cents) to $3.99.
- Clearwire (NASDAQ:CLWR): Up 11.11% (25 cents) to $2.50.
- Hecla Mining (NYSE:HL): Up 9.2% (55 cents) to $6.53.
- Fusion-Io (NYSE:FIO): Down 9.06% ($2.91) to $29.22.
- Pandora (NYSE:P): Down 6.64% (73 cents) to $10.27.
- Suntrust Banks (NYSE:STI): Down 6.43% ($1.24) to $18.03.
As of this writing, Kyle Woodley did not hold a position in any of the aforementioned stocks. Check out our list of previous IP Market Recaps.