This Weeks Free Stock Pick - Investing in Restaurant Earnings Growth
Who doesn't like a good night out at a restaurant? Living in Chicago, I'm about as spoiled as they come. You see, here in the Windy City, we've got restaurants of all shapes, sizes, and styles all over the place. So I'm a little bit picky when it comes to where I chose to go to eat. Typically, I try and avoid the big restaurant chains that are out there because, frankly, a Ma and Pa spot around the neighborhood will usually put it to shame. But I can't deny the appeal of some of the restaurants owned by today's Bull of the Day, Darden (NYSE:DRI).
Darden's restaurants include Olive Garden, Longhorn Steakhouse, Bahama Breeze, Seasons 72, The Capital Grille, Eddie V's, and the Yard House. Over 150,000 people work for Darden and through its subsidiaries, Darden owns and operates more than 1,500 restaurants and serves more than 320 million meals a year.
Recently Darden spun off the Four Corners Property Trust (NYSE:FCPT) REIT which owns the real estate which the Olive Garden locations are situated on. The spinoff initially caused a drop in shares of Darden but shares have roared back, recouping all of that drop and more. The result is a very happy shareholder cashing in not only on a 3.4% dividend from Darden but also plenty of future potential income from FCPT.
Darden is a Zacks Rank #1 (Strong Buy) in a retail restaurant industry that ranks in the Top 35% of our Zacks Industry Rank. A big reason for the favorable Zacks Rank is the big earnings beat that saw analysts rush to up their earnings estimates. Last quarter, Darden's EPS came in at 54 cents versus our Zacks Consensus Estimate calling for 42 cents. That marked the sixth consecutive earnings beat for shares of Darden.
As I mentioned before, shares of Darden have taken off following the spinoff of FCPT. For most of 2015, Darden shares were in a steady uptrend. After hitting a 52-week high of $67.59 on July 23rd, shares began to retreat, dipping below the 50-day moving average and eventually dipping all the way down to $53.53 before finding support in mid-November. From there, the buyers have stepped in with force and pushed shares of Darden back up above $65.