Darden Restaurants, Inc. DRI is scheduled to report second-quarter fiscal 2025 results on Dec. 19, before the opening bell. In the last reported quarter, the company reported a negative earnings surprise of 3.31%.
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DRI’s Q2 Expectations
The Zacks Consensus Estimate for the fiscal second-quarter earnings per share (EPS) is pegged at $2.05, indicating growth of 11.4% from $1.84 reported in the year-ago quarter.
For revenues, the consensus mark is pegged at $2.9 billion. The metric suggests an increase of 5.3% from the year-ago quarter’s figure.
Darden Restaurants, Inc. Price and EPS Surprise
Darden Restaurants, Inc. price-eps-surprise | Darden Restaurants, Inc. Quote
Let’s discuss the factors likely to be reflected in the quarter to be reported.
Factors to Note Ahead of DRI’s Q2 Release
Darden’s fiscal second-quarter performance is likely to have benefited from culinary innovation, enhanced guest satisfaction and strategic marketing initiatives. By refining core menu items and introducing new culinary options, the company has increased its appeal to a broad customer base. This, combined with improvements in service speed and restaurant environments and the Thanksgiving calendar shift, is likely to have aided the top line in the fiscal second quarter.
Darden’s commitment to menu innovation is evident in its offerings across various brands. Olive Garden’s return of customer favorites like Steak Gorgonzola Alfredo and Stuffed Chicken Marsala, both upgraded with higher-quality ingredients, is likely to have driven higher guest satisfaction. LongHorn Steakhouse’s new lemon garlic chicken dish and Yard House’s revamped pizza menu are other examples of the company’s efforts to cater to evolving customer preferences. These initiatives are expected to have supported higher sales and customer loyalty in the fiscal second quarter.
Darden’s investments in restaurant maintenance and remodels are likely to have enhanced its dining environments, contributing to improved guest experiences and potentially higher customer retention. The company's focus on delivering quicker meal occasions across its brands is likely to have helped capture additional guest traffic.
Darden’s marketing efforts (designed to build brand equity without heavy discounting) are expected to have played a significant role in the fiscal second quarter. Olive Garden’s extended "Never Ending Pasta Bowl" promotion is likely to have maintained its appeal, boosting sales. Additionally, the company’s use of digital and connected TV marketing strategies is likely to have driven incremental sales during the quarter, reaching new and existing customers.
Our model predicts revenues from Olive Garden and LongHorn Steakhouse to rise 3.7% and 6.9% year over year to $1.3 billion and $0.7 billion, respectively.
Elevated expenses concerning food, beverage and labor costs are likely to have dented margins in the to-be-reported quarter. Our model predicts fiscal second-quarter food and beverage, and labor costs to rise 4.1% and 4.9% year over year to $880 million and $924 million, respectively.
What Our Model Says About DRI Stock
Our proven model does not conclusively predict an earnings beat for Darden this time. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. However, that's not the case here.
DRI’s Earnings ESP: Darden has an Earnings ESP of -2.58%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
DRI’s Zacks Rank: The company has a Zacks Rank #3.
Stocks to Consider
Here are some stocks worth considering from the Zacks Retail-Wholesale sector that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat.
Brinker International, Inc. EAT currently has an Earnings ESP of +19.03% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
EAT’s earnings for the to-be-reported quarter are expected to increase 46.5% year over year. It reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, with the average surprise being 12.1%.
CAVA Group, Inc. CAVA has an Earnings ESP of +11.36% and a Zacks Rank of 2 at present.
CAVA’s earnings for the to-be-reported quarter are expected to increase 200% year over year. It reported better-than-expected earnings in each of the trailing four quarters, with an average earnings surprise of 91.8%.
Chipotle Mexican Grill, Inc. CMG has an Earnings ESP of +7.32% and currently carries a Zacks Rank of 3.
CMG’s earnings for the to-be-reported quarter are expected to increase 14.3% year over year. It reported better-than-expected earnings in each of the trailing four quarters, with an average earnings surprise of 9.8%.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
