TipRanks | Mar 24, 2015 08:37AM ET
Darden (NYSE: DRI ), the restaurant operator that owns Olive Garden, LongHorn Steakhouse, and Capitale Grille, released impressive quarterly results on March 20 signifying a strong turnaround for the once struggling group.
Darden Restaurants Inc (NYSE:DRI) has had an eventful year. Activist hedge fund Starboard Value LP won the battle to take over Darden’s board in October. Starboard won the shareholder vote to replace the board by criticizing the restaurant group with a list of complaints, from wasting money on unlimited breadsticks to the Olive Garden’s reluctance to salt the pasta water to avoid eroding the pots. Prior to the Starboard takeover, Darden hastily sold the Red Lobster chain, much to the chagrin of Starboard who believed the sale was undervalued.
Highlights from Darden’s third quarter report include a nearly 7% increase year-over-year in sales, now totaling $1.73 billion. The restaurant operator posted diluted earnings per share of $0.99, easily beating estimates of $0.84 and signifying an impressive 39% increase from the same quarter last year. Same-store sales increased across the board, averaging 3.6% per franchise. Looking forward, Darden provided guidance for the fourth quarter of earnings per diluted share between $0.91 to $0.94, slightly higher than the analyst consensus of $0.89. Following the impressive report, Darden shares hit a new 52-week high of $70 on Friday morning.
CEO Gene Lee commented:
“Our strategy of getting back to basics and elevating the food, service, and atmosphere in our restaurants in order to deliver the best possible guest experience is driving these sales and profitability improvements.”
Lee was unanimously voted in as CEO in February after Starboard took over the board. Lee has over 30 years of restaurant experience and has been with Darden since 2007. Wall Street also notes that Darden’s strong performance was driven in part by an improved economy and lower gas prices, which has left more money in consumers’ pockets.
Darden is also exploring options to create value from real estate. The restaurant operator plans to sell its headquarters in Orlando valued at $152 million and is reportedly looking into turnings its restaurant properties into REITs.
On March 22, analyst TipRanks is Moderate Buy.
Disclosure: All analyst recommendations for Darden sourced from TipRanks.
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