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Could Darden Restaurants Stock be a Tasty Investment as Earnings Approach?

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs
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Darden Restaurants Inc. is experiencing a notable uptick, with its stocks trading up by 7.37 percent on Thursday. This surge is largely driven by optimistic public sentiment following the release of impressive quarterly results and an exciting new partnership with a tech industry leader. Analysts are bullish on Darden’s outlook, expecting sustained growth given its strategic moves.

  • Notable companies reporting before tomorrow’s open, with earnings consensus, include Darden, with a consensus of $1.83.
  • Raymond James predicts Darden’s Olive Garden earlier launch of ‘Never Ending Pasta’ promotion, despite possibly tracking below expectations, could boost fiscal Q1 comparable sales.
  • Darden Restaurants’ ‘Never Ending Pasta’ promotional period is highlighted as an opportunity for increased sales, with strong performance anticipated from LongHorn Steakhouse.
  • Several companies, including Darden, are set to report financial results later in the week, following the positive trend indicated by pre-market activity.
  • Stephens adjusted the price target for Darden to $159 from $165, with an average rating of outperform and price targets ranging from $124 to $191.

Candlestick Chart

Live Update at 10:51:48 EST: On Thursday, September 19, 2024 Darden Restaurants Inc. stock [NYSE: DRI] is trending up by 7.37%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Darden Restaurants Inc.’s Positive Momentum

Darden Restaurants Inc. is set to release its fiscal 2025 first-quarter financial results on Sep 19, 2024, with a slew of strong indicators to back up the anticipation. This food service juggernaut has been a favorite on Wall Street, largely due to its ability to bounce back stronger against economic headwinds. Investors are eagerly awaiting these results, fueled by several encouraging developments.

Earnings Buzz and Analyst Expectations:

First off, Darden is expected to report a consensus earnings of $1.83 before market opens. It’s like the calm before the storm – a storm full of potential overperformances. Raymond James has a strong belief that Olive Garden’s early launch of the ‘Never Ending Pasta’ promotion could be a game-changer. Even if fiscal Q1 numbers track slightly under expectations, this initiative is believed to keep the sales comparable high. It’s all about the timing, and Darden might have hit the jackpot here.

Next, let’s look at the overall sales trend, particularly at Darden’s flagship chains like Olive Garden and LongHorn Steakhouse. Analysts forecast a rebound in Q2, leveraging the strategic ‘Never Ending Pasta’ period. Taking the market by storm just when competition is at its peak is a typical Darden move. And guess what? LongHorn Steakhouse is riding a wave of strong momentum thanks to better-than-expected same-store sales. Fiscal year 2025 guidance is projected to be reaffirmed, honing in on steady growth—imagine the stock soaring on this steady diet of upward revisions.

Positioning Ahead of Results:

Many companies, like Lennar and FedEx, are set to disclose their results around the same time as Darden, and positive pre-market trends paint a rosy picture. Stephens has adjusted Darden’s price target to $159 from $165, still holding an outperform rating. How high could it go remains speculative but options ranging from $124 to $191 provide a landscape of optimistic possibilities.

Conducting a deeper dive into the chart price data reveals the stock’s recent performance. Let’s take a look at the price movements for DRI:
“`
Date Open High Low Close

240919 173.51 173.51 167.18 170.87
240918 162.33 162.49 158.98 159.14
240917 160.66 162.7099 160.59 161.53
240916 161.31 162.54 159.7 160.14
240913 159 160.94 158.91 160.25
“`
The data for Sep 19 portrays a noticeable jump from 162.33 to 173.51 in the span of just a couple of days, illustrating market confidence ahead of earnings. This momentum, coupled with a robust fundamental backdrop, showcases Darden’s resilience.

Quick Snapshot of Darden Restaurants’ Financial Aura

Before diving into the nitty-gritty, let’s take a quick look at Darden’s financial landscape:

  • Profitability Ratios are robust: EBIT margin at 11.8%, EBITDA margin at 15.8%, and a notable return on equity (ROE) at a stunning 30.03%.
  • Revenue Standout: With an annual revenue of $11.39B and a solid history of revenue growth—16.54% over three years.
  • Valuation and Strength: A PE ratio of 18.41 and enterprise value pegged at $24.17B, showcasing market faith in its future earnings.

Now, looking into the story chart for intraday movements compile together for an insightful read amidst the stock roller coaster. Here’s a snapshot of how the stock capriciously moved on Sep 18:
“`
Time Open High Low Close

11:50 170.87 170.9 170.81 170.87
11:45 170.78 170.94 170.62 170.87
11:40 170.46 170.72 170.3016 170.665
11:35 170.515 170.57 170.395 170.495
11:30 170.385 170.6 170.38 170.52
“`
The play between these levels signifies upbeat fights between bulls and bears, showcasing the gradual rise in pricing.

The Giant’s Financial Voice

Cash Flow Statement: With an ending cash position of $220.1M and Free Cash Flow at $278.7M, Darden flexes its operational robustness backed by $427.9M from continuing operations. Combined with strategic repurchase moves ($973M), Darden stands grounded financially.

Key Performance Ratios: High current ratio (0.5) and quick ratio (0.2) might feel tight, but Darden mastered its receivables turnover at 143! Securing and balancing numbers—such as return on capital indicating 16.59% LTM—provides stability during tumultuous periods.

The Backdrop of Financial Statements: As we peek into their balance sheet, marked by total assets crossing $11.32B and measuring financial strength through payable assets at $476.6M; this brand shows a remarkable grip on its finances amidst brand expansions. Coupled with an impressive return on assets (9.53% LTM), Darden keeps proving its mettle.

Tracking Revenue Generation Impact

Raymond James suggests that Olive Garden’s early promotion could skyrocket sales, while potential tracking below consensus might just get overridden by market enthusiasm. Stephens is increasing its price target, an opportunistic move seeing the cheerful pre-market trends. Oppenheimer, while hinting at possible misses, still retains an outperform rating, consistently setting high benchmarks for Darden’s strategic initiatives.

More Breaking News

In Conclusion

This mosaic of news regarding Olive Garden’s promotion, anticipated earnings, and analyst optimism positions Darden on a positive streak. Its financial strength and initiatives reflect a company poised to exceed expectations. Investors might just find Darden a tasty investment as they unveil earnings—solidifying its flavorful promise on the stock table. Can they turn this anticipated momentum into a lasting trend? Only tomorrow’s open will tell.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”