Friday is typically not a busy day from the corporate news front as many companies decide to report their earnings in the beginning of the working week. On the 22nd of June only two large US corporations opened their books. Darden Restaurant and Carnival PLC published their quarterly results. The following is a brief review of the most important facts pertaining to their reports.
Darden Restaurants (DRI), the full service restaurants operator, reported its fourth quarter results Friday. The company reported net earnings of $152 million for the final quarter, or $1.15 per share. Darden managed to increase its earnings per share by 15% on the back of a mere 3.8% increase in total revenues to $2.07 billion. Revenue growth was driven by the acquisition of 11 restaurants and the net new opening of another 89 restaurants compared to the final quarter last year. The company reported 3.0% same store sales growth for its LongHorn franchise offset by a same store sales decline of 1.8% at Olive Garden and 3.9% at its Red Lobster restaurants.
For the full year of 2012, the company reported earnings from continuing operations of $477 million, or $3.58 per share. Full year revenue growth came in at 6.6% to $8.00 billion. The results in the fourth quarter were impacted by an earlier Lenten season and Eastern holiday and a less effective national advertising campaign. For 2013 Darden expects solid revenue and earnings growth, despite an "uneven and slow recovery in the general economy and the restaurant industry." For the final quarter of 2012 the board of directors set its quarterly dividend to $0.50 per share, providing investors with an annual dividend yield of 2.0%. Shares in Darden fell 0.7% on the day as investors were not impressed with the results. So far in 2012 shares have returned about 10%.
Carnival Corporation (CCL), the operator of cruise ships known for its well known brands including Carnival, Holland America Lines and Princess Cruises, announced its second quarter results Friday. The company reported non-GAAP net income of $159 million, or $0.20 per share which compares to earnings of $0.26 last year. GAAP net income was a mere $14 million, or $0.02 per share, as the company lost a lot on unrealized fuel hedges. Revenues fell 3% on the year to $3.5 billion. The company looks forward to the rest of the year with confidence as booking volumes have increased 8% on the year. Demand is driven by an aggressive pricing strategy which implies a 3 to 4% decline in revenues per customer for 2012. Tight cost control allows the company to lower its net costs for the year, resulting in a boost to its earnings. For the whole year of 2012 Carnival now expects earnings per share between $1.80 and $1.90, compared to 2011's earnings of $2.42.
Despite the company's upbeat comments, shares ended the day down 2.7% as investors were not anticipating such poor earnings for the latest quarter. Furthermore investors do not appreciate the steep price discounts offered to induce customers to book a cruise in an attempt to bridge the lack of demand after the Costa Concordia disaster in January. The raise in the full year earnings outlook did not impress investors either as it is purely driven by lower fuel costs and not by a sustained increase in demand. Despite the steep share price declines in the wake of the Costa Concordia disaster, shares are flat for the year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.