A Rising Appetite for Darden's Stock

Investors applauded the Red Lobster parent's forecast of higher annual earnings per share growth

Darden Restaurants, Inc. (DRI) said late Sept. 19 that it had solid quarterly results, thanks to factors such as sales growth combined with lower expenses.

The Orlando, Fla.-based chain, which operates many restaurants including Red Lobster and Bahama Breeze, said it had diluted net earnings per share of 59 cents during the quarter ended Aug. 27, an 11% increase over the prior year, on net earnings of $88.5 million.

First quarter sales increased 3.3% to $1.46 billion, driven by sales growth at its Olive Garden and Smokey Bones restaurants. (Olive Garden opened 18 new restaurants.)

Darden also announced that it now expects annual diluted net earnings per share growth of 10% to 12%, an increase from its previously stated expectation of 9% to 10% diluted net earnings per share growth for the fiscal year.

Investors applauded the news. The stock gained 5.7% to $41.07 per share on the New York Stock Exchange in afternoon trading.

Standard & Poor's Corp. hiked its 12-month target price on the stock by $2 to $42 per share, noting the company's "improved operating margin projections." Analyst Dennis Milton maintained a hold rating on the stock. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

Results "reflect competitively superior performance in an economic environment that clearly has its share of challenges because of the considerable consumer uncertainty that currently exists," Clarence Otis, Chairman and Chief Executive Officer of Darden said in a press release.

So far he's managed to keep on cooking.

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