Shares of Darden Restaurants closed 2.1% lower on Friday after the multi-brand restaurant operator reported lower-than-expected sales results for 2Q and provided a dim outlook for 3Q.
Darden’s (DRI) 2Q revenue of $1.66 billion missed analysts’ expectations of $1.68 billion. Quarterly sales declined 19.4% year-over-year mainly due to “negative blended same-restaurant sales of 20.6%, which were partially offset by the addition of 19 net new restaurants.”
Darden’s 2Q earnings per share dropped 33.9% to $0.74 but beat the Street’s estimates of $0.71.
“I was pleased with our ability to once again deliver strong profitability in an unpredictable sales environment,” said CEO Gene Lee. He further added, “We continue to view this environment as a rare opportunity to meaningfully transform our business for long-term growth. Our brands made additional strides to invest in and strengthen their businesses to ensure they emerge even stronger and better positioned to grow share.”
For 3Q, Darden expects total sales to grow between 65% and 70% year-on-year. Meanwhile, analysts are projecting revenue of $1.93 billion, reflecting a year-over-year decline of 17.6%. EPS is forecasted to be in the range of $0.50-$.75, compared to the Street consensus of $1.28.
Following the earnings release, Stephens analyst James Rutherford raised the stock’s price target to $135 (16.2% upside potential) from $115 and maintained a Buy rating. Rutherford believes that the company is poised to gain market share in a post-vaccine environment and benefit from higher demand.
Overall, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 17 Buys and 8 Holds. The average price target stands at $116.79 and implies upside potential of about 0.5% to current levels. Shares have gained 6.6% year-to-date.