The three major U.S. equity indexes closed higher Monday. The Dow Jones industrials ended the day up 0.6%, the S&P 500 closed up 0.69% and the Nasdaq added 0.76%. Seven of 11 sectors ended the day with gains, ranging from 1.2% (consumer cyclicals) to 0.4% (communications services). The consumer staples sector closed flat.
Government data on new housing starts rose month over month in August, but new building permits issued came in lower than expected and lower month over month. The Federal Reserve’s interest rate announcement due Wednesday afternoon is expected to push rates up by 0.75% to a new range of 3.00% to 3.25%. All three major indexes were down 1% or so early Tuesday.
There were no notable earnings reports released late Monday or before U.S. markets opened on Tuesday. Later Tuesday and early Wednesday, Aurora Cannabis, General Mills and Stitch Fix will post their quarterly results.
Here is a look at four companies reporting quarterly results late Wednesday or Thursday morning.
Darden Restaurants
Darden Restaurants Inc. (NYSE: DRI), the owner and operator of more than 1,800 restaurant locations, including Olive Garden and Longhorn Steakhouse, will report first-quarter fiscal 2023 results before markets open on Thursday. Over the past 12 months, Darden stock has dropped by about 11.3%. Since dipping to a 52-week low in mid-June, however, shares have added about 16%.
Darden has been trying to ease the impact of inflation on its customers by keeping price hikes down. Investors are likely to be most concerned about how Darden’s generosity to customers could affect the handsome dividend the firm pays.
Of 30 analysts covering the stock, 20 have a Buy or Strong Buy rating and the other 10 rate the shares at Hold. At a recent price of around $132.50 a share, the upside potential based on a median price target of $140.00 is 5.7%. At the high price target of $156.00, the upside potential is 17.7%.
First-quarter revenue is forecast at $2.47 billion, which would be down 5.2% sequentially and up 6.9% year over year. Adjusted earnings per share (EPS) are forecast at $1.57, down 30.8% sequentially and 10.8% lower year over year. For the full 2023 fiscal year that ends next May, current estimates call for EPS of $7.75, up 4.9%, on sales of $10.3 billion, up 7%.
Darden stock trades at 17.1 times expected 2023 EPS, 15.5 times estimated 2024 earnings of $8.57 and 13.9 times estimated 2025 earnings of $9.55 per share. The stock’s 52-week trading range is $110.96 to $164.28. Darden pays an annual dividend of $4.84 (yield of 3.73%). Total shareholder return for the past year was negative 8.3%.
KB Home
After markets close Wednesday, homebuilder KB Home (NYSE: KBH) will share its third-quarter 2022 results. Like Darden, the homebuilder posted its 52-week low in mid-June, and shares had added about 29% by mid-August, before losing more than half that gain by last week. Rising costs, continuing supply chain issues and rising mortgage rates are having a negative impact on all homebuilders, but everything is relative. KeyBanc analyst upgraded KB Home from Underweight to Sector Weight on Monday but did not assign a price target.
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