Darden Restaurants (DRI): Expect Share Gains And Guidance Reiteration - Wells Fargo
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Wells Fargo analyst, Jeff Farmer, reiterated his Market Perform rating on shares of Darden Restaurants (NYSE: DRI) ahead of F1Q earnings on 10/4 (BMO). The analyst is expecting EPS of $0.84 (+23% yr/yr), just above the $0.82 Street estimate.
Key focus points:
1) Olive Garden’s (OG) absolute and relative same-store sales (SSS), especially given weakening industry sales trends
2) updated FY17 guidance, particularly any changes to the company’s willingness to pass through incremental cost savings to shareholders (currently targeting $30M in FY17 savings with anything above this level to be reinvested)
3) management’s take on the health of the US consumer. While we expect DRI to reiterate its FY17 EPS outlook ($3.80-$3.90),
The analyst stays on the sidelines with his Market Perform rating due to continued industry top-line challenges and his expectation that earnings growth will decelerate moving forward as the company reinvests incremental cost savings at the expense of upward EPS revisions in coming quarters.
No change to the valuation range of $66 - $70.
Shares of Darden Restaurants closed at $62.47 yesterday.
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