Darden Continues To Cook Up Solid Results, But A Better Entry Point For The Stock Is Needed

Shares of Darden Restaurants, Inc. DRI were trading lower by around 4 percent early Tuesday morning after the company reported its fiscal first-quarter earnings report.

The restaurant operator reported that it earned 99 cents per share in the quarter, which was in-line with the $1.00 per share Stephens' Will Slabaugh was expecting and the $0.99 per share Wall Street analysts were expecting. In fact, the earnings report marks the 11th consecutive quarter in which the company at the very least matched consensus EPS expectations.

However, the company's Olive Garden unit reported a same-store sale gain of 1.9 percent, which was short of the 2.0 percent the analyst was expecting and short of the consensus estimate of 2.8 percent. But despite a same-store sale miss, the company reaffirmed its status as a "sustained out-performer in a difficult restaurant environment."

Yet despite another positive top-line result, the stock's multiple isn't particularly attractive, Slabaugh commented. The company's status as an outperformer is already reflected in at 9.7x 2018E adjusted EBITDA and investors looking to buy the stock are better off waiting for a better entry point.

Slabaugh maintains an Equal-Weight rating on Darden's stock with an unchanged $95 price target.

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