Jim Cramer on Darden: “I Bet This One is a Winner”

Darden Restaurants, Inc. (NYSE:DRI) is one of the 12 stocks on Jim Cramer’s radar recently. Discussing that DRI stock was down for the day on Monday despite the “consumer discretionary group ending the day as the best performing sector”, Cramer stated:

“… I think it presents a compelling opportunity for you out there… Last Friday, [it] reported a phenomenal quarter… Now, this is just the latest in a long line of strong results from these guys… You’re getting this great quarter for free. I think that is quite simply a steal… On top of that, management gave a solid full-year forecast… On Friday’s conference call, CEO Rick Cardenas also gave a quick summary of Darden’s new five-year plan. I found it pretty encouraging.

… But perhaps the most interesting thing from the company’s earnings call came from a response that Cardenas gave to the first analyst question… Specifically, [he] wanted to know why some of the larger chains, like the ones run by Darden, appear to be doing much better than the smaller operators. Cardenas explained that it’s all about value. During the past five years, while the price of everything was going up, Darden has worked hard to keep its price increases below inflation. This is absolutely true, and now that the consumers have become more value-conscious, they’re going to places like Olive Garden that offer them tremendous deals. It’s gotten to the point where Darden’s taking share from the fast food and fast casual chains, they used to dominate on the value front…

… When we found out how ineffective the Iranian attack was, oil ended up closing down more than 8%, which is incredibly bullish for Darden stock. The bottom line: I think you’re getting a tremendous opportunity with the Darden pullback today. Not only are you getting a good quarter for free, but if higher oil really does take a bite out of consumer spending, companies like Darden might be able to take even more market share because they’re the ones that offer people the best value at this moment. With the stock selling for roughly 20 times this year’s earnings estimates, supporting a 2.7% yield, not to mention that $1 billion buyback, I bet this one is a winner.”

A single diner enjoying an elegant meal in a sophisticated restaurant setting.

Darden Restaurants (NYSE:DRI) owns and operates a portfolio of full-service restaurants across the U.S. and Canada, and the company’s brands include Olive Garden and LongHorn Steakhouse.

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