Story updated at 9:45 a.m. to reflect market activity.
Shares of Darden Restaurants were falling -0.9% to $47.33 in morning trading.
The analyst firm also lowered its estimates for the restaurant operator. A lot of expenses remain for Darden, even following the Red Lobster split, according to Credit Suisse Analysts.
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Separately, TheStreet Ratings team rates DARDEN RESTAURANTS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate DARDEN RESTAURANTS INC (DRI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.0%. 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 5.90% 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.
- The gross profit margin for DARDEN RESTAURANTS INC is rather low; currently it is at 21.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.91% trails that of the industry average.
- You can view the full analysis from the report here: DRI Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.