Problems in the Restaurant Biz
Darden Restaurants, Inc. (NYSE:DRI), the owner of Olive Garden, Red Lobster, and other restaurants, will report third quarter earnings on Friday. This company has had major problems increasing customer traffic and yet the stock has risen over 9% in the last 30 days. Same store sales have declined in December and January, and are expected to fall another 4.5% in February. Analysts are currently estimating earnings to be $1.01 on revenue of around $2.3 billion.
The company’s second quarter earnings fell 37%, and the estimated $1.01 for the third quarter will represent a 19.2% decrease year-over-year. $2.3 billion in revenue would be a 4.5% growth from the previous year, a very unimpressive number. With earnings expected to drop another 10% in the fourth quarter, I think Darden Restaurants, Inc. (NYSE:DRI)’s run is over, and the company will head lower. I would sell this stock immediately and wait to buy until their yield rises to 4.75%.
The Foolish Bottom Line
February housing starts data and a Federal Reserve meeting will also be taking place this week. Keep an eye on these events, as they will have a strong influence on the direction of the market. Again, I am looking to buy Cintas, hold FedEx Corporation (NYSE:FDX), and avoid Darden.
The article 3 Stocks to Watch This Week originally appeared on Fool.com and is written by Joseph Solitro.
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