Darden stock surges after Earnings Beat and Acquisition deal

Multi-brand restaurants operating company Darden Restaurants Inc. saw its stocks soaring in Tuesday trading session following the upbeat release of its third quarter earnings call along with an acquisition deal made with Cheddar’s Scratch Kitchen.

On Tuesday, Darden stock (NYSE: DRI) closed 9.31% or $7.04 higher to $82.62 per share. The company had a market value of 10.11 billion with a dividend yield of 2.71%.

The stock benefitted very well from the two recent news released by Darden. The earnings beat and takeover deal also help in increasing investor confidence over the company as it received a “Strong Buy” rating both for short and long term traders. All of the technical indicators for DRI also point to a bullish outlook ahead.

For the earnings call, Darden posted the third quarter earnings ending February 26, 2017 with third quarter sales 1.7% higher year over year at $1.88 billion with an earnings of $1.32 per share. EPS and revenues were able to beat analyst expectations of $1.27 EPS on revenue of $1.86.

“We continued to gain market share as we outperformed industry same-restaurant sales by a considerable margin again this quarter. Our teams remain incredibly focused on driving strong operating fundamentals, and I’m very proud of the work they are doing to create memorable experiences for our guests,” said Darden CEO Gene Lee.

Most of Darden’s business saw growth with Fine Dining sector leading with 5.3% increase from a year ago followed by LongHorn Steakhouse with 2.1% boost and Olive Garden sales higher by 1.5%. Other businesses of Darden, however, saw a decline by 0.2% during the quarter.

In addition to that, Darden has also increased its 2017 financial outlook by 1.5% for same-restaurant sales and diluted net earnings per share around $3.95 and $4.00.

Meanwhile, Darden Restaurants has also announced that it has reached an agreement to purchase Texas-based restaurant brand Cheddar Scratch Kitchen valuing the latter company at a total of $780 million, to be paid for in an all-cash transaction.

With the acquisition for Cheddar, Darden will add this brand to its portfolio of wide range of restaurant brands, which currently includes Olive Garden, Yard House, Red Lobster, The Capital Grille, LongHorn Steakhouse, Bahama Breeze, Season 52, and Eddie V’s.

Cheddar CEO Ian Baines has also expressed delight and favor over the acquisition, believing that this will open more opportunities for the company. “We are excited about the opportunity to be a part of Darden. Our operating philosophy and values are similar and we believe this transaction provides a great opportunity for our team members to continue to grow and develop in their careers. Additionally, Darden’s expertise will enable us to further capitalize on our growth potential.”

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