As I highlighted in a prior article, the barbecue market can be a roaster for corporations that don't bring their A-game sizzle to the dinner table. Still, corporations such as Buffalo Wild Wings (NASDAQ:BWLD), Famous Dave's (NASDAQ:DAVE), and Darden's (NYSE:DRI) Smokey Bones are eagerly poking prongs in the piggy biz. Darden Restaurants certainly isn't having second thoughts about throwing its hat in the ring; the latest report highlights a company that is more than happy with Smokey Bones' growth.
While the company didn't have any bones to pick with its BBQ concept, longtime Darden investors have become accustomed to its Red Lobster entity coming up raw and smelly. Given its struggles, it's obvious that there is more to hooking customers than offering an all-you-can-eat fish fry. Perhaps Landry's (NYSE:LNY) Joe's Crab Shack, with its emphasis on fun and fish, is the right way to bait folks in the door. The exact ingredient for success remains debatable, but Darden shareholders have to take a little more comfort in the company's latest results.
For the third quarter, revenues climbed 10.8% to $1.4 billion. From the sales, the company netted $92.6 million in earnings, higher by 20.1%. Battling high commodity costs, Darden can take pride in improving operating margins that stepped up to 9.5% versus the 8.9% from the same period a year ago.
Red Lobster's output was still nowhere near the level of its sister, Olive Garden. The Italian food restaurant posted 10.5% comparable same-store sales growth. But Red Lobster's 5.1% same-store improvement is nothing to get seasick over, considering the eatery's pattern of empty nets.
Darden's bullish third quarter led the company to raise its fiscal 2005 estimates under the expectation that the stampede will continue. Initially, its earnings per share (EPS) were expected to improve from 10% to 15%. Accounting for its latest success, it now expects EPS growth of 19% to 21% for the year.
With full-year EPS estimated to be approximately $1.63 (not including anticipated restructuring charges for the fourth quarter), Darden's stock is currently valued at a Cajun-spiced 20 times current-year earnings. Certainly Foolish investors may have a bone to pick with the company's valuation, but its recent improvements may be an incentive to drop a line in and see whether you can land a bargain Darden.
To catch up on Darden's competitors, check out these articles:
Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.
