Financial Trading Blog
Stock of the day 19/03/2015 – Darden Restaurants Inc
The big upswing on the markets that Darden saw at the end of 2014 continued into the New Year, with the stock opening at $58.91. Its lowest price in 2015 came only a few days later, falling to $57.99 on January 5th; however, this brief wobble was an anomaly with Darden making impressive progress in this first quarter of the year. It is now trading at $65.51, marginally lower than the $65.75 intraday high it hit on Wednesday.
However, whilst things are strong on the markets, Darden’s present situation is less rosy elsewhere. Darden’s Q2 2015 release back in December saw a 30% drops in year-on-year profits, and things aren’t forecast to be much better come Friday. Analysts are predicting a marginal increase in earnings per share to $0.84, the only bright spot in a release that is likely to see a 23% decline in year-on-year drop to $1.72 billion. This eventuality would see Darden reach its 5th quarter of losses.
Yet investors still seem to be confident in the stock, and that might be due to the big waves made by activist investor group Starboard Value. After ousting the entire board in 2014 the interim CEO since October, Eugene Lee Jr, was given the job on a permanent basis, with his appointment being seen as a positive by investors. At the same time, Starboard Value is trying to work its way through Darden’s real-estate surplus, recently announcing the intention to sell the company’s Orlando head-quarters and then lease it back.
Moves like this, as well as the Olive Garden turnaround that provided a silver lining to the disastrous second quarter announcement, mean investors remain bullish on the stock even if the big changes it is currently going through shown no signs of stopping. It will be interesting to see how far investors are willing to follow Darden, especially if the third quarter losses arrive as bad as expected.
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