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Darden Restaurants Inc. (NYSE:DRI) is slated to release its third-quarter 2012 results on March 23. The current Zacks Consensus Estimate for the third quarter is $1.24 per share on revenue of $2,142 million.

The current Zacks Consensus Estimate for the third quarter reflects a year-over-year growth of 14.61%, respectively.

Earnings Surprise

With respect to earnings surprises, over the trailing four quarters, Darden has outperformed the Zacks Consensus Estimate in three out of four quarters in the range of negative 2.38% to 2.86%. The average earnings surprise was a positive 0.24%. This implies that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter Recap

Orlando, Florida-based Darden posted second quarter fiscal 2012 earnings from continuing operation of 42 cents per share, in line with the Zacks Consensus Estimate, but down from the year-ago earnings of 55 cents per share.

Total revenue grew 6.1% from the prior-year quarter to $1,831.5 million and surpassed the Zacks Consensus Estimate of $1,827.0 million.

Earnings Estimate Revisions – Overview

Ahead of the earnings release, we have noticed a positive sentiment prevailing around the stock.

Agreement of Estimate Revisions

In the last 30 days, 25 out of 27 analysts covering the stock increased their estimates for the third quarter. Of the 26 analysts, 24 raised their estimates for fiscal 2012 while none moved in the opposite direction.

Magnitude of Estimate Revisions

The Zacks Consensus Estimate also took a modest jump in the last 30 days, increasing from $1.19 to $1.24 per share for the upcoming quarter. For the full year, analysts expect earnings per share to move up to $3.60 from $3.54.

Our Take

Darden is anticipated to emerge from the pressure it was reeling under last quarter. Management is hopeful of seeing impressive numbers ahead, thanks to a shift in the Lenten season, which started during the fiscal third quarter this year as opposed to the the fiscal fourth quarter last year, as well as a comfortable winter this year.

The best part is that, Olive Garden, which was badly hit in the second quarter, responded to the initiatives Darden took in the third quarter and will likely post positive comps. Darden itself guides comps growth of 2% at Olive Garden in the upcoming quarter.

On the flip side, there is food cost inflation. Although food inflation has begun to moderate year over year, prices are still high. Darden sees approximately 6% food and beverage cost inflation in the third quarter that will ease out in the fourth quarter. Darden which competes with Texas Roadhouse Inc. (NASDAQ:TXRH), currently retains a Zacks #3 Rank (short-term Hold rating).

DARDEN RESTRNT (DRI): Free Stock Analysis Report

TEXAS ROADHOUSE (TXRH): Free Stock Analysis Report

Source: Darden Restaurants: Earnings Preview