Darden Restaurants Boosts 2015 Outlook; Q3 Results Top Estimates

(RTTNews) - Darden Restaurants, Inc. (DRI) reported Friday a profit for the third quarter that increased 30 percent from last year, reflecting lower charges and improved sales. Both adjusted earnings per share and quarterly sales topped analysts' expectations.

The company also provided earnings guidance for the fourth quarter, above Street view, and raised earnings outlook for the full year 2015.

"We delivered solid improvement in our financial results this quarter thanks to the hard work our teams are doing to grow same-restaurant sales and control costs. Our strategy of getting back to basics and elevating the food, service, and atmosphere in our restaurants in order to deliver the best possible guest experience is driving these sales and profitability improvements," CEO Gene Lee said in a statement.

Lee was confirmed to the position of CEO on February, after he served on an interim basis since mid-October, when Clarence Otis stepped down from the position, amid pressure from activist investor and Darden Restaurants' key shareholder, Starboard Value L.P. Otis was to step down as chairman and CEO by December 31, 2014.

The Orlando, Florida-based full service restaurants operator reported net earnings of $133.8 million or $1.05 per share for the third quarter, higher than $109.7 million or $0.82 per share in the prior-year quarter.

Earnings from continuing operations increased to $128.4 million or $1.01 per share from $86.6 million or $0.65 per share last year.

Excluding items, adjusted earnings from continuing operations for the quarter was $0.99 per share, compared to $0.71 per share in the year-ago quarter. On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.84 per share for the quarter. Analysts' estimates typically exclude special items.

Total sales for the quarter grew 6.9 percent to $1.73 billion from $1.62 billion in the same quarter last year, and topped seventeen Wall Street analysts' consensus estimate of $1.72 billion by a whisker. Darden comparable same-restaurant sales for the quarter grew .6 percent.

Olive Garden sales grew 3.0 percent to $957 million, and its U.S. same-restaurant sales were up 2.2 percent. Longhorn Steakhouse's sales improved 11.4 percent to $404 million, with U.S. same-restaurant sales also increasing 5.4 percent.

The Specialty Restaurant Group's sales grew 14.7 percent to $367 million, with U.S. same-restaurant sales growth of 6.1 percent at The Capital Grille, 3.2 percent at Bahama Breeze, 9.6 percent at Eddie V's, 5.4 percent at Yard House, 5.2 percent at Seasons 52.

The company also declared a quarterly cash dividend of $0.55 per share on its outstanding common stock, payable on May 1, 2015 to shareholders of record at the close of business on April 10, 2015.

Looking ahead to the fourth quarter, the company projects earnings in a range of $0.91 to $0.94 per share, while analysts project $0.89 per share.

For fiscal 2015, the company raised its adjusted earnings forecast to a range of $2.45 - $2.48 per share from the prior outlook range of $2.25 - $2.30 per share. The Street is currently looking for full-year 2015 earnings of $2.30 per share.

The guidance reflects projected U.S. same-restaurant sales growth of 2.0 to 2.5 percent and the positive $0.05 per share impact of a 53rd operating week in the fiscal year.

DRI closed Thursday's regular trading session at $64.87, down $0.32 on a volume of 1.87 million shares. In the past 52-week period, the stock has been trading in a range of $43.56 to $65.75.