Darden Restaurants (DRI) stock is soaring Thursday after the company announced a new partnership with Uber Technologies (UBER) for home food delivery. This is helping offset the Olive Garden parent's top- and bottom-line miss for its fiscal first quarter.
In the three months ended August 25, Darden's revenue increased 1% year-over-year to $2.76 billion, driven by the addition of 42 net new restaurants. This helped offset a 1.1% decline in same-restaurant sales. Its earnings per share (EPS) were down 1.7% from the year-ago period to $1.75.
"We operate in a very dynamic, competitive industry and we have proven we can successfully navigate challenging environments due to our strategy," said Darden CEO Rick Cardenas in a statement. "While we fell short of our expectations for the first quarter, I firmly believe in the strength of our business. I am confident in the actions all our brand teams are taking to address their guests' needs, which do not compromise the long-term health of our business for short-term benefits."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results also fell short of analysts' expectations. Wall Street was anticipating revenue of $2.8 billion and earnings of $1.83 per share, according to Yahoo Finance.
Even though its first-quarter earnings came in below estimates, Darden reiterated its full-year outlook, which calls for earnings per share in the range of $9.40 to $9.60.
"The significant step down in traffic during July, led to our first-quarter earnings being lower than expected," said Darden Chief Financial Officer Raj Vennam. "Following the softness in July, our sales trend has continued to improve. Considering this recovery as well as the planned initiatives to support the remainder of the fiscal year, we are reiterating our guidance for fiscal 2025."
Darden teams up with Uber
In a separate press release, Darden announced a new partnership with Uber for home food delivery. The collaboration will begin with select Olive Garden locations in late 2024 and will expand nationwide by May 2025.
"Guests have been asking us for home delivery options and they continue to show they are willing to pay for the convenience," Cardenas said. “As we continued to evaluate delivery, it was important for us to find a way to address this guest need state without disrupting the team member or guest experience and without compromising our competitive advantages and simple operating model."
The executive added that it believes Uber is a partner that shares the same vision and can meet the company's expectations. Darden did not indicate if or when its other brands would join the program.
Is DRI stock a buy, sell or hold?
Heading into today's session, Darden Restaurants was flat for the year to date on a total return basis (price change plus dividends). Yet, Wall Street remains bullish on the consumer discretionary stock.
According to S&P Global Market Intelligence, the consensus recommendation among the analysts following the stock that it tracks is a Buy. Meanwhile, the average price target of $170.18 represents a slight discount to where the stock is trading after Thursday's surge.
Financial services firm Oppenheimer is one of those with an Outperform rating (equivalent to a Buy) on DRI, along with an above-average $182 price target.
"We continue to believe DRI represents the best-in-class investment opportunity in casual dining with its reliable earnings model, unique scale advantages, and a strong management team with an under-promise, over-deliver mentality," said Oppenheimer analyst Brian Bittner in a September 16 note.
Related Content
-
Retiring in 2035? Here's What Your First Day Could Look LikeYour 2035 retirement isn't just a date. It's a day in your life. Here's what your future self might do on the first day and how retirement will have changed.
-
Could This Southeast Asian Country Be the Best Place to Retire?This country's vibrant cities, serene beaches and rich heritage make it a hot tourist destination. Its low living costs make it a great place to retire.
-
Timing Your Retirement: A Financial Professional's Guide on When to Say WhenFirst, ask yourself what kind of retirement you want: big and splashy or simple and sweet. Then you can run the numbers to help choose just the right moment.
-
Three Common Social Security Myths in 2025: A Retirement Strategist Explains What You Need to KnowTaxes on benefits haven't been eliminated, and based on current projections, the program isn't going bankrupt. Understanding the truth about Social Security and knowing what you can control can help you better prepare for retirement.
-
Dow Hits New Intraday High: Stock Market TodayValue-hunters with big stakes in a particular component kept one of the main U.S. equity indexes in positive territory.
-
Berkshire Buys the Dip on UnitedHealth Group Stock. Should You?Buffett & Co. picked up UnitedHealth stock on the cheap, with the embattled blue chip one of the newest holdings in the Berkshire Hathaway equity portfolio.
-
Mutual Funds Are About to Get the ETF Treatment. Here's What It Means for InvestorsThe SEC is expected to decide soon whether mutual funds from dozens of providers can be offered as ETF share classes.
-
Thanks to the OBBB, Now Could Be the Best Tax-Planning Window We've Had: 12 Things You Should KnowThe new tax legislation offers unique opportunities to make smart financial moves and save on taxes, especially for people nearing or in retirement with significant savings.
-
Market Rebounds Are Happening Fast: Should You Buy the Dips? A Financial Planner's GuideMarkets are bouncing back faster than ever. For some long-term investors, that could mark a compelling case for systematic investing during downturns.
-
Markets Weigh Earnings and Inflation: Stock Market TodayThe major U.S. indexes struggled Thursday amid a hot inflation reading and seasonal headwinds.
