Darden Restaurants, Inc. (DRI – Free Report) is one of the largest casual dining restaurant operators. The company reports its business in four segments: Olive Garden, LongHorn Steakhouse, Fine Dining, which includes The Capital Grille and Eddie V’s, and Other Business.

In April 2017, Darden completed the acquisition of small restaurant chain, Cheddar’s Scratch Kitchen (Cheddar’s), in an all-cash deal worth $780 million. Cheddar’s seems to be a great fit in the company’s portfolio as it not only complements its existing brands, but is also expected to aid in attracting customers. This, in turn, should drive Darden’s comps and resultantly sales, going ahead. Darden also believes that the addition of Cheddar’s will help boost its scale and wide range of data and insights.

Most of Darden’s brands have been witnessing growth over the past few quarters on the back of sales initiatives like simplifying kitchen systems, better in-restaurant execution to enhance guest experience, menu innovation, remodeling along with various technology-driven moves. Also, the company’s efforts to check costs are commendable.

However, increased labor costs and a non-franchised business model may dent the company’s profits, while a soft consumer spending environment in the U.S. restaurant space might continue to restrict revenue growth.

Investors should note that the current-quarter and year earnings consensus estimate for DRI have increased 1.4% and 0.2% respectively over the last 60 days. Moreover, DRI’s earnings have been strong over the past few quarters. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 2.29%. Meanwhile, revenues posted positive surprises in three of the trailing four quarters.

DRI currently has a Zacks Rank #3 (Hold) but that could change following Darden’s earnings report which was just released. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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