Citigroup Lowers Darden Restaurants to 'Underperform'

Analyst Mark Kalinowski says the restaurant operator's earnings growth goal for fiscal 2004 is far lower than his estimates

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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