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Why Darden Restaurants Stock Popped Today

By Jeremy Bowman – Updated Apr 14, 2019 at 6:09PM

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Shares of the casual-dining chain gained on a strong earnings report and improved guidance.

What happened

Shares of Darden Restaurants (DRI -0.34%) were climbing today after the casual-dining specialist posted better-than-expected results in its third-quarter earnings report and raised its full-year outlook. As of 11:03 a.m. EDT, Darden stock was up 6.2%.

So what

The Olive Garden parent company said overall comparable-store sales rose 2.8% with a particularly strong performance at the Olive Garden chain, where comps rose 4.3%. That drove overall revenue up 5.5% to $2.25 billion, which edged out estimates of $2.24 billion. 

The exterior of an Olive Garden restaurant

Image source: Darden Restaurants.

The rising comps drove a stronger increase in profits as restaurant-level profits rose 9% at Olive Garden and 7.2% at Longhorn Steakhouse, its next largest chain, and overall operating income was up 14% in the quarter to $265.5 million. As a result, adjusted earnings per share rose from $1.71 to $1.80 -- the company also got a large tax benefit in the year-ago quarter -- but that still topped expectations of $1.75.

CEO Gene Lee touted the company's performance, saying, "Our strong top-line results exceeded the industry this quarter resulting in significant market share gains. This sales performance, coupled with strong operating profit growth, is a testament to our strategy and the outstanding focus and execution by our restaurant teams who create exceptional dining experiences for our guests every day."

Check out the latest earnings call transcript for Darden Restaurants.

Now what

Looking ahead, the company also signaled optimism as it raised its full-year outlook. Darden is now calling for comp sales growth of 2.5%-2.7%, up from a previous forecast of 2.5%. On the bottom line, it sees earnings per share of $5.76-$5.80, up from $5.60-$5.70. 

During a tumultuous time for the restaurant industry, which has been pressured by oversaturation and the rise of delivery apps, Darden has continued to execute. The stock is up 22% over the past year, and it seems like a good bet to continue outperforming the industry.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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