Shares of Darden Restaurants Inc. DRI, the Orlando, Florida-based company that owns restaurant chains like Olive Garden and Capital Grille, surged over 7% on Thursday on the back of releasing fiscal third-quarter earnings results that topped analyst estimates and providing an upbeat guidance for the year.
For the quarter ended Feb. 28, Darden reported net income of $128.7 million, or 98 cents in diluted earnings per share, compared with net income of $232.3 million, or $1.90 in diluted earnings per share, in the prior-year quarter. Adjusted earnings of 98 cents per share outperformed the Refinitiv consensus estimate of 69 cents per share. 
Company reports sales decline for fiscal third quarter but sees rebound in upcoming months
Darden reported net revenue of $1.73 billion for the quarter, outperforming the consensus estimate of $1.63 billion yet down 26.1% from the prior-year quarter, driven by coronavirus-related lockdown measures impacting same-restaurant sales across the company's brands.
Despite the setback, Darden CEO Gene Lee and Chief Operating Officer Rick Cardenas mentioned during the company's earnings call several business model transformations that helps the company "navigate the unprecedented change and uncertainty," including technology developments like curbside delivery and digital sales.
Cardenas discussed during the earnings call that restaurants like Olive Garden adapted their menu offerings, focusing on the top 10 items ordered and removing "low-demand" items from the menu. The chief operating officer added that the top 10 menu items accounted for more than half of total Olive Garden sales and that the restaurant offered timely curbside delivery of its food products.
Stock soars as company provides strong outlook for fiscal 2021 and beyond
Shares of Darden traded at an intraday high of $145.62, up approximately 8.7% from Wednesday's close of $133.93 on the company's upbeat guidance for the next few months.
For the fiscal fourth quarter, Darden expects total sales of approximately $2.1 billion and earnings per share between $1.60 per share and $1.70 per share, signaling a rebound in sales performance over the next three months. Lee also mentioned several incentives for Darden employees, including a one-time bonus and hourly wage hikes.
Darden also mentioned that it expects to open a net 33 new restaurants during fiscal 2021 and a net 35 new restaurants during fiscal 2022.
Company profitability outlook
GuruFocus ranks Darden's profitability 6 out of 10 on the back of profit margins and returns outperforming over 65% of global competitors despite trending near 10-year lows. Additionally, Darden's three-year revenue growth rate of 3.8% outperforms 63.61% of global restaurant companies.
Gurus with holdings in Darden include Andreas Halvorsen (Trades, Portfolio)'s Viking Global Partners and Steven Cohen (Trades, Portfolio)'s Point72 Asset Management.
Disclosure: No positions.
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