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CIBC Cuts Darden Restaurants to 'Sector Underperform'


CIBC World cut Darden Restaurants (DRI) to sector underperform from sector perform.

Analyst John Glass cites continued performance issues at Red Lobster, and an anticipated significant second-quarter earnings miss, as well as management's too-optimistic outlook for the second half of 2003. He cut the $1.41 fiscal 2004 (May) earnings per share estimate to $1.38, and the $1.58 fiscal 2005 estimate to $1.54. He notes that first-quarter earnings per share were above his 38 cents estimate, but says Darden took an axe to second-quarter projections -- lowering the 18 cents forecast to 15 cents.

Glass says clearly the worst is still not behind the stock -- Red Lobster is the main reason; profits fell due to ineffective cost management. He says September results are expected to decline sharply on a poorly received, low-margin promotion at Red Lobster restuarants. Finally, Glass set a $19 price target.


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