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Earnings Previews: Darden Restaurants, KB Home, Rite Aid, Winnebago

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The three major U.S. equity indexes closed mixed Friday with the Dow Jones industrials closing down about 0.1%, while the S&P 500 closed up 0.2% and the Nasdaq closed up 1.4%. For the month to date, the Dow is down 8.7%, the S&P 500 is down 11.1% and the Nasdaq is down about 12%. The indexes traded up between 1.5% and 2.5% Tuesday morning.
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Before markets opened on Tuesday, homebuilder Lennar reported solid beats for both profits and revenue. Shares were up about 1.6% in morning trading.

Here is a look at four companies scheduled to release quarterly results between Tuesday afternoon and 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 fiscal fourth-quarter results before markets open on Thursday. Over the past 12 months, Darden’s stock has dropped by about 9.5%. Shares have plunged more than 14% so far in June, posting a 52-week low last Thursday. The company lowered its guidance when it reported March-quarter earnings. Investors probably would like to hear that guidance for the 2023 fiscal year is moving in the other direction.

Of 29 analysts covering the stock, 19 have a Buy or Strong Buy rating and the others rate the shares at Hold. At a recent share price of around $114.20, the upside potential based on a median price target of $150.00 is 31.3%. At the high price target of $180, the upside potential is 57.6%.

Fourth-quarter revenue is forecast at $2.54 billion, which would be up 3.7% sequentially and 11.4% higher year over year. Adjusted earnings per share (EPS) are forecast at $2.21, up 14.6% sequentially and 8.9% year over year. For the full 2022 fiscal year that ended in May, current estimates call for EPS of $8.14, up 71.5%, on sales of $9.57 billion, up 33%.

Darden stock trades at 15.5 times expected 2022 EPS, 14.0 times estimated 2023 earnings of $8.14 and 12.8 times estimated 2024 earnings of $8.91 per share. The stock’s 52-week range is $110.96 to $164.28. Darden pays an annual dividend of $4.18 (yield of 3.85%). Total shareholder return for the past year was negative 9.5%.

KB Home

After markets close Wednesday, homebuilder KB Home (NYSE: KBH) will report second-quarter 2022 earnings. Shares have plummeted by more than 26% this month and closed at their 52-week low last Friday. Given rival Lennar’s upbeat report Tuesday morning, investors appear to be taking their time deciding what that means for KB Home. The stock is inactive in Tuesday’s premarket.

Of 17 analysts covering the stock, 12 rate the shares a Buy or Strong Buy and three have Hold ratings. At a share price of around $25.60, the implied upside based on a median price target of $44.00 is 74.9%. At the high price target of $73, the upside potential is 185%.

For the company’s second quarter of fiscal 2022, analysts are expecting sales of $1.66 billion, up 18.4% sequentially and 15.3% higher year over year. EPS are forecast to rise by 38.4% sequentially to $2.03, or by 35.3% year over year. The consensus estimate for the 2022 fiscal year ending in November calls for EPS of $10.07, up 65.7%, on sales of $7.32 billion, up 27.8%.

KB Home stock trades at 2.5 times expected 2022 EPS, 2.4 times estimated 2023 EPS of $10.78 and 2.2 times estimated 2024 EPS of $11.42. The stock’s 52-week range is $24.78 to $50.20. KB Home pays an annual dividend of $0.60 (yield of 2.35%). Total shareholder return for the past 12 months is negative 38.9%.

Rite Aid

Drugstore operator Rite Aid Corp. (NYSE: RAD) reports fiscal 2023 first-quarter results first thing Thursday. Over the past 12 months, the share price has plunged by about 69%. The stock has traded above the break-even line since late last June, as Rite Aid has been buffeted by competition, opioid litigation and a credit rating downgrade.
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In an interview with the Washington Post last week, CEO Heyward Donigan said, “The pharmacy of the future is going to start with your phone.” Investors are going to want to know more details, especially about how much such a transition will cost and how Donigan expects to finance it.

Just three analysts pay attention to the shares, and none rates the stock above a Sell. At a share price of around $6.20, the stock is trading above its median price target of $4.00. Upside potential based on a high price target of $8.00 is 29%.

First-quarter revenue is expected to come in at $5.73 billion, down 5.5% sequentially and 7.0% year over year. The adjusted loss per share is forecast at $0.70, compared to a loss per share of $1.63 in the prior quarter and a loss per share of $0.38 in the first quarter of last year. For the full 2023 fiscal year ending in February, Rite Aid is expected to post a loss per share of $1.41, compared to last year’s loss of $1.51. Revenue is expected to drop by 6.7% to $22.91 billion.

Rite Aid is also not expected to post a profit in 2023, 2024 or 2025. The company’s enterprise value to sales multiple for each of the three fiscal years is 0.3. The stock’s 52-week range is $4.68 to $20.95. Rite Aid does not pay a dividend. Total shareholder return for the past year was negative 69.2%.

Winnebago

Recreational vehicle maker Winnebago Industries Inc. (NYSE: WGO) has dropped about 26.9% from its value over the past 12 months. Over the past two years, the share price has tumbled by about 33%. The stock posted an all-time high in March of last year and a 52-week low less than a month ago. Like rival Thor Industries, Winnebago faces inventory issues as inflation and a possible recession take the air out of spending on expensive discretionary goods. While quarterly results may be okay, guidance will be investors’ focus. The company reports quarterly results early Wednesday.

Of 12 analysts covering the stock, eight have a Buy or Strong Buy rating and the others have a Hold rating. At a share price of around $45.20, the upside potential to a median price target of $72.00 is 59.3%. At the high price target of $85.00, the upside potential is 88%.


Fiscal third-quarter revenue is forecast at $1.21 billion, down 4.7 sequentially but up 25.9% year over year. Adjusted EPS are forecast at $2.96, down 5.8% sequentially and up 37% year over year. For the full 2022 fiscal year ending in August, current estimates call for EPS of $12.23, up 43%, on sales of $4.64 billion, up 28%.

Winnebago stock trades at 3.7 times expected 2022 EPS and 4.8 times estimated 2023 earnings of $9.42. The stock’s 52-week range is $43.05 to $80.30. Winnebago pays an annual dividend of $0.60 (yield of 1.59%). Total shareholder return for the past year was negative 26.9%.

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