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Legg Mason Cuts Darden Restaurants


Legg Mason cuts Darden Restaurants (DRI) to sell.

Analyst Glenn Guard says he downgrades to sell from hold as Red Lobster traffic remains weak. He notes January numbers provide conviction that sustained reversal here over at least next year highly unlikely.

While Olive Garden continues to post strong results, at just 45% of revenue, it can't carry the entire story. He cuts $1.71 fiscal 2005 (ending May) earnings per share estimate to $1.66, $1.86 fiscal 2006 earnings per share to $1.77 to take into account the continued anticipated weakness at Red Lobster.

While he thinks Darden has done a good job managing costs, he believes there is a limited amount of further cost savings possible in the near term.


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