Harris Nesbitt Keeps Underperform on Darden Restaurants

Analyst Matthew aDifrisco remains concerned with traffic declines at Red Lobster

Harris Nesbitt keeps its underperform rating on Darden Restaurants (DRI ).

Analyst Matthew Difrisco says the 46 cents fourth-quarter operating EPS was a penny ahead of his estimate and two cents above consensus. He says EPS quality is soft, given aid from favorable cost of goods sold, and a greater share repurchase.

Difrisco remains concerned with traffic declines at Red Lobster. He says management's guidance represents a lackluster outlook given negative year-ago same-store sales, and a more profitable portfolio of restaurants post-closures. He keeps the $1.63 fiscal 2005 EPS estimate and the $19 target.

Difrisco says near-term investor concern will likely be focused on May's traffic decline at Olive Garden and uncertainty about Red Lobster's turnaround.

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