The parent of Olive Garden restaurants gapped up to an all-time high Thursday despite a mixed quarterly report. The company also announced it is expanding its delivery service via a new pilot program with Uber Technologies.
Darden Restaurants reported it earned $2.80 a share for the February-ended quarter, matching the consensus estimate from FactSet. But sales of $3.158 billion, up 6.2%, missed expectations for $3.214 billion.
Same-restaurant sales climbed 0.7%, also below views for a 1.6% increase, according to FactSet.
At the company's flagship Olive Garden, sales edged up 1.5% to $1.33 billion year over year. CEO Rick Cardenas said several of the company's brands set sales records during the holidays and Valentine's Day, and company teams "controlled what they could control."
For the full fiscal year ending in May, Darden forecast sales of about $12.1 billion, same-restaurant sales growth of about 1.5% and earnings from continuing operations, excluding Chuy's transaction costs, of $9.45 to $9.52 per share. In October, Darden completed its $605 million acquisition of Chuy's Holdings, which operates more than 100 restaurants.
The Olive Garden parent also announced that it is adding a pilot program with Uber for 10 Cheddar's Scratch Kitchen locations. Darden and Uber are already offering delivery service for Olive Garden. A successful pilot program at that chain and a successful full rollout "gave us confidence to quickly move to piloting delivery at Cheddar's" said Chief Information Officer Chris Chang.
Olive Garden Stock Hits New High
Darden stock gapped up to a gain of 7.5% around 10:45 a.m. ET. Shares climbed above the 50-day moving average, at about 191.60, in what could be an aggressive entry. The relative strength line also made new highs, a positive sign.
But remember, the stock market remains in a correction.
Of 54 stocks in IBD's restaurants industry group, Darden has the eighth-best Composite Rating, 92 out of a best-possible 99.
The stock has a 21-day average true range (ATR) of 2.62%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
In the current weak market, IBD suggests stocks with ATRs of 3% or lower.
