What traders need to know before DRI's earnings report release tomorrow
Restaurant name Darden Restaurants, Inc. (NYSE:DRI) is mostly known for brands including Olive Garden, Longhorn Steakhouse, and The Capital Grille. Darden Restaurants has more than 1,800 restaurant locations and more than 175,000 employees, making it one of the largest full-service restaurant companies in the world.
Darden Restaurants is due to report earnings tomorrow before the open, Dec. 18 as it looks to end the year on a high note. DRI has beaten expectations on all four of its most recent earnings reports. In the fourth quarter of 2019, Darden Restaurants stock beat expectations by $0.05, reporting an earnings per share (EPS) of $1.12. In the first quarter of 2020, Darden Restaurants stock increased its EPS to $1.90, beating analysts' expectations by a margin of $0.02.
Then came COVID-19. DRI reported a huge decrease in earnings in the second quarter of 2020. Darden Restaurants stock reported a significantly chopped EPS of -$1.24, still beating expectations by a pretty big margin of $0.40. In the company's most recent quarter, DRI bounced back from the red and reported an EPS of $0.56. Darden Restaurants stock beat expectation by a considerable margin of $0.51. For the upcoming earnings report due out tomorrow, DRI is expected to report an EPS of $0.72.
Darden Restaurants stock also has a forward dividend of $1.20 and a forward dividend yield of 1.05%. Darden Restaurants last paid a dividend of $0.30 for the third quarter of 2020 after cutting its dividend in the second quarter of 2020. Darden Restaurants stock has paid dividends to investors since 1995.
In the last month, Darden stock has reclaimed its 12-month and year-to-date breakeven levels. The shares bounced off their 80-day moving average back in November to gap higher to an annual peak of $125.96. That's a far cry from DRI's March 18 11-year low of $26.15.
Darden Restaurants has undoubtedly seen decreases in revenue and profit in 2020 as a result of the Covid-19 pandemic. No breaking news there. The company has been heavily impacted because its business model had been dependent on the full-service experience for in-person dining, and in-person dining has been highly regulated due to COVID-19 precautions.
Darden Restaurants has lost more than $700 million in annual revenue when compared to what it produced in 2019. Bottom line, the company is standing at a net loss of $183.7 million just in the past 12 months. Compare this to 2019, where Darden Restaurants produced a net profit of $718.6 million. Adding to company's list of woes, Darden has racked up a massive $5.75 billion in debt this year, and the company’s balance sheet carries just $654.6 million in cash.
On the flip side, DRI's performance prior to 2020 was outstanding. The company had grown its net income by roughly 50% and added more than $1.3 billion in revenue over the span of just two years. Darden Restaurants seemed to have a winning business model before COVID-19 struck the entire restaurant industry. Now the company will have to wait and see if the same model will work post-pandemic, or if Darden Restaurants will need to permanently modify Its core business model.