The current Wall Street consensus expectation is for Darden Restaurants to report 82c EPS and $2.251B revenue while the current Estimize.com consensus from 9 Buy Side and Independent contributing analysts is 87c EPS and $2.274B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Darden Restaurants to beat the Wall Street consensus on both EPS and revenue by a comfortable margin.
Over the past 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting Darden Restaurants’s EPS and revenue 4 and 3 times resepectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a larger than usual difference between the 2 groups’expectations.
The distribution of estimates published by analysts on the Estimize.com platform range from 79c to 94c EPS and from $2.194B to $2.351B in revenues. This quarter we’re seeing a larger distribution of estimates on Darden Restaurants.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Over the past 4 months the Wall Street EPS consensus fell from $1.07 to 82c while the Estimize consensus decreased from 94c to 87c. Meanwhile the Wall Street revenue forecast dropped from $2.392B to $2.251B while the Estimize forecast declined at the end of the quarter from a high of $2.342B to $2.274B. Timeliness is correlated with accuracy and downward analyst revisions at the end of the quarter are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is turbinecity who projects 83c EPS and $2.259B in revenue. In the Winter 2014 season turbinecity is rated as the top analyst and is ranked 6th overall among over 4,000 contributing analysts. This season turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 60% and 58% of the time respectively throughout over 1000 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case turbinecity is expecting Darden Restaurants to beat Wall Street’s expectations but fail to live up to the consensus forecast from the Estimize community.
This quarter the Red Lobster spin off and the poor weather are expected to keep Darden’s earnings below levels reported in FQ3 last year. However, contributing analysts on the Estimize.com platform are still expecting Darden Restaurants to beat Wall Street’s expectations by a comforable margin.
Get access to estimates for Darden Restaurants published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.