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Citigroup Lowers Darden Restaurants to 'Underperform'


Citigroup downgraded Darden Restaurants (DRI) to underperform.

Analyst Mark Kalinowski says his concerns include poor sales at Bahama Breeze, as well as various cost pressures such as insurance, which has deepened. He notes Darden has instituted an 8%-12% growth goal for fiscal 2004 (May), which is lower than his 13% estimate.

Kalinowski thinks a disappointing outlook for fiscal 2004 is actually worse than it appears at second glance. Darden's fiscal 2004 contains 53 weeks, in a typical year, with the extra 53rd week generally adding 5 cents to 6 cents to its annual earnings per share, however, the 8%-12% earnings per share growth goal includes this benefit. He cut the $1.47 fiscal 2004 earnings per share to $1.44, and reduced the $22 target to $18.


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