Darden Restaurants, Inc. (DRI - Free Report) reported better-than-expected results in the first quarter of fiscal 2019. Adjusted earnings of $1.34 per share surpassed the Zacks Consensus Estimate of $1.23. The bottom line also increased 35.4% year over year on the back of higher revenues. Notably, the quarter marked the 16th consecutive earnings beat for the company. Results were aided by the company’s relentless efforts in improving the basic operating factors of the business — food, service and atmosphere.

Total revenues of $2,061.4 million exceeded the consensus mark of $2,028 million. Revenues also increased 6.5% from the prior-year quarter. The upside was driven by sales growth across most of the brands.

Following the quarterly results, shares of Darden increased 5% in pre-market trading. In a year’s time, the stock has gained 42%, outperforming its industry’s 6.1% growth.

Revenues by Segments

Darden reports business under four segments: Olive Garden, LongHorn Steakhouse, Fine Dining that includes The Capital Grille and Eddie V's, and Other Business.

In the fiscal first quarter, the company’s legacy brands posted blended comps growth of 3.3%. In the last reported quarter, comps had increased 2.2%.

Sales at Olive Garden were up 6.3% year over year to $1,052 million. Comps grew 5.3% at the segment, higher than the prior-quarter’s comps growth of 2.4%. Traffic rose 1.5% along with 1.9% improvement in pricing and 1.9% growth in menu mix.

Sales at Fine Dining increased 6.3% to $129.9 million. Comps at The Capital Grille rose 3.9% compared with 2.8% reported in fourth-quarter fiscal 2018. Eddie V's also posted comps growth of 3%, lower than 4.1% improvement recorded in the last reported quarter.

Revenues from Other Business jumped 7.1% year over year to $449.1 million. However, comps at Seasons 52 fell 1.9% in the quarter compared with fourth-quarter fiscal 2018 comps decline of 0.6%. Comps at Yard House inched up 0.6% compared with 1.1% increase in the last reported quarter. Meanwhile, comps grew 1.1% at Bahama Breeze, flat quarter over quarter.

At LongHorn Steakhouse, sales rose 6.4% to $430.4 million. Comps at LongHorn Steakhouse increased 3.1%, down from fourth-quarter comps growth of 2.4%. Traffic decreased 0.3%, while pricing and menu mix grew 1.6% and 1.8%, respectively.

In the reported quarter, comps at Cheddar's decreased 4% compared with the prior-quarter’s decline of 4.7%.

Darden Restaurants, Inc. Price, Consensus and EPS Surprise

Darden Restaurants, Inc. Price, Consensus and EPS Surprise | Darden Restaurants, Inc. Quote

Operating Highlights & Net Income

In the fiscal first quarter, total operating costs and expenses increased 6.3% year over year to $1,872.3 million. The upside was driven by an overall increase in food and beverage costs, restaurant labor and expenses, and marketing costs. As a result, operating margin in the quarter contracted 20 basis points (bps) on a year-over-year basis.

Net earnings in the first quarter were $166.2 million, recording 39.7% growth from the year-ago level.

Balance Sheet

Cash and cash equivalents as of Aug 26, 2018 totaled $151.8 million, up from $146.8 million on May 27, 2018.

Inventories summed $194.6 million at the end of the reported quarter. Goodwill, as a percentage of total assets, was 21.5% in the quarter.

Long-term debt as of Aug 26, 2018 was $926.8 million, up from $926.5 million on May 27, 2018.

During the first quarter, the company repurchased approximately 0.3 million shares of its common stock for a total cost of approximately $31 million. The company still has $480 million remaining under the current $500 million repurchase authorization.

The company’s board of directors declared quarterly dividend of 75 cents. The quarterly dividend is payable Nov 1, 2018 to its shareholders of record as of Oct 10, 2018.

Fiscal 2019 Outlook

For fiscal 2019, the company expects total revenues in the range of 5-5.5%, up from then prior estimate of 4-5%. Comps are projected to increase 2-2.5% compared with prior estimate of 1-2%. With an anticipated effective tax rate in the band of 10-11%, Darden’s diluted earnings per share is anticipated to be in the range of $5.52-$5.65, up from the initial estimate of $5.40-$5.56.

Zacks Rank & Other Stocks to Consider

Currently, Darden carries a Zacks Rank #2 (Buy). 

Some other top-ranked stocks in the industry include Dine Brands’ (DIN - Free Report) , Ruth’s Hospitality Group (RUTH - Free Report) and Sonic (SONC - Free Report) , each carrying a Zacks Rank #2.

Dine Brands’, Ruth’s Hospitality and Sonic’s earnings for 2018 are projected to increase 29.2%, 26.4% and 18.4% respectively.