Darden Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of restaurant operator Darden Restaurants (NYSE: DRI  ) sank 10% on Tuesday after the company slashed its full-year 2012 outlook.

So what: Darden's cut was so big -- management now sees 2012 EPS growth of 4%-7% versus its prior view of 12%-15% -- that Wall Street has no choice but to lower its valuation estimates on the stock. Same-stores sales declines at its Olive Garden chain continue to hit Darden particularly hard, so it's no surprise that the shares are once again flirting with their 52-week lows.

Now what: I wouldn't be so quick to pounce on today's plunge. Margin-pressuring promotions, rising food costs, and lower traffic should continue working against Darden in the short term, while its clear lack of moat makes it an easy pass for the long term. Although they operate in the same fickle space, casual dining picks like Panera Bread (Nasdaq: PNRA  ) and Buffalo Wild Wings (Nasdaq: BWLD  ) can at least offer some tasty growth potential.

Interested in more info on Darden? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Panera and Buffalo Wild Wings. Motley Fool newsletter services have recommended buying shares of Panera and Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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  • Report this Comment On December 06, 2011, at 1:32 PM, DangerousDave8 wrote:

    How about DRI's red lobster? Anyway, Buffalo Wild Wings BWLD has some pretty strong seasonal moves upward this time of year (See statistical data: http://tradingclearly.com/BWLD/seasonality/calendar/)

    BWLD could be a good buy soon...

  • Report this Comment On December 06, 2011, at 3:06 PM, zephyr2 wrote:

    It doesn't help DRI much that their CEO/chairman wrote an opinion piece on CNN.com today (of all days) crying about how government regulations are hurting businesses everywhere and this is one reason why the unemployment rate is up. What a fool! Govt. regs have been in place for years and it wasn't hurting most businesses. In fact, businesses just like DRI had been booming. BTW, have you seen his salary lately? The company is falling and his salary just keeps rising. Let's see him take a pay cut!

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