NEW YORK (TheStreet) -- Darden Restaurants (DRI - Get Report) stock is lower Friday after announcing it will sell seafood chain Red Lobster to private equity firm Golden Gate Capital in a deal worth $2.1 billion.
This comes despite warnings from activist investors including Starboard Value and Barington Capital that a sale would curtail shareholder value.
By midafternoon, shares had tumbled 3.1% to $49.12.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.8%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, DRI has underperformed the S&P 500 Index, declining 7.38% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, DARDEN RESTAURANTS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has decreased to $363.70 million or 13.87% when compared to the same quarter last year. Despite a decrease in cash flow of 13.87%, DARDEN RESTAURANTS INC is in line with the industry average cash flow growth rate of -22.05%.
- You can view the full analysis from the report here: DRI Ratings Report