Harris Nesbitt keeps its underperform rating on Darden Restaurants (DRI).
Analyst Matthew Difrisco says the 46 cents fourth-quarter operating EPS was a penny ahead of his estimate and two cents above consensus. He says EPS quality is soft, given aid from favorable cost of goods sold, and a greater share repurchase.
Difrisco remains concerned with traffic declines at Red Lobster. He says management's guidance represents a lackluster outlook given negative year-ago same-store sales, and a more profitable portfolio of restaurants post-closures. He keeps the $1.63 fiscal 2005 EPS estimate and the $19 target.
Difrisco says near-term investor concern will likely be focused on May's traffic decline at Olive Garden and uncertainty about Red Lobster's turnaround.