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Darden (NYSE:DRI) Q3 Results: Here’s What to Expect
Stock Analysis & Ideas

Darden (NYSE:DRI) Q3 Results: Here’s What to Expect

Story Highlights

Darden Restaurants is scheduled to report its Q3FY23 results on March 21. Inflation and labor shortages have been the toughest headwinds for the restaurant industry thus far.

Darden Restaurants (NYSE:DRI) is set to report its third-quarter Fiscal 2023 results on March 23, before the market opens. The Street expects Darden to post diluted earnings of $2.25 per share on sales of $2.73 billion. In the prior year’s quarter, Darden posted adjusted earnings of $1.93 per share on sales of $2.45 billion.

Darden is a popular American restaurant chain with brands such as Olive Garden and Longhorn Steakhouse under its flagship. Year to date, DRI stock has been trending up consistently and has gained 8.5% so far in 2023.

Factors Impacting Darden’s Q3 Results

Some of the most common factors influencing the restaurant industry are inflation, labor issues, and competition. The earnings expectation for Darden’s unreported quarter shows a significant jump from Q2FY23 and Q3FY22 results. Following the pandemic-induced food home delivery habit, customers have now started venturing out and boosting the dine-in sales of restaurants. On their part, restaurants have also increased the in-house dining experience for customers. Plus, the staffing issues restaurants faced during the pandemic have faded, and restaurants are fully staffed to better serve customers.

Having said that, persistent inflation has impacted customers’ dining habits to a certain extent as they delay discretionary spending. Although food inflation is hurting Darden’s margins, the restaurant chain is able to pass on some of the price increases to customers.

Further, the lurking recessionary fears and steadily increasing interest rate scenario may pose a threat to the restaurant industry in general. Shareholders must closely consider the management’s outlook for the coming months to gauge how DRI is prepared to fight inflationary pressures and possible economic downturns.  

Is Darden a Good Stock to Buy?

With nine Buys and two Hold ratings, Darden earns a Strong Buy consensus rating on TipRanks. The average Darden Restaurants price target of $162.09 implies 7.6% upside potential from current levels. Moreover, DRI pays a regular quarterly common dividend of $1.21 per share, reflecting a healthy current yield of 3.14%.

Final Thoughts

Darden Restaurants has been able to sustain the inflationary pressures quite well so far. Also, analysts seem bullish about the stock’s trajectory, and it pays healthy dividends. DRI will remain resilient so long as inflation remains under check and the U.S. is able to avoid a recession.

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