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It's Time to Dine With Darden

September 28, 2009

By Tobin Smith, Editor, ChangeWave Investing

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Tobin Smith

Tobin Smith

Tobin Smith is the founder and editor of ChangeWave Investing. He also serves as executive editor of ChangeWave MicroCap Investor, and contributes his weekly market outlook and editorial rants to ChangeWave's WaveWire e-letter, which is read by more than 250,000 investors each week.

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Although you may not be familiar with the name Darden Restaurants (DRI), you are no-doubt familiar with its ubiquitous Olive Garden, Red Lobster, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52 restaurants. The company certainly has carved out a niche in the casual dining market, and their consistent earnings growth over the past several years has been impressive.

On Tuesday, Sept. 29, we'll find out how well Darden performed on the earnings front over the past three months. But regardless of whether the company beats consensus forecasts for earnings of 66 cents per share (versus 61 cents a year ago), there is one thing for certain we can say about Darden.

According to the ChangeWave Alliance Research Network, the outlook for restaurant spending is improving, and that improved outlook is particularly strong for Darden.

According to two recent surveys — one on overall consumer spending and one on specific dining habits — there's been a decisive uptick in restaurant spending after four consecutive monthly surveys of virtually no change. The survey found that over the past 90 days, 27% of respondents say they've spent more than planned on eating out, while only 19% said they spent less than planned — a net 11-point improvement since our May survey.

And when it came to future dining plans, we asked respondents which restaurant chains they planned to dine out at. In what is likely to bode very well for Darden, both Olive Garden and Red Lobster where atop the heap when it came to where respondents said they would be spending more versus less money over the next 90 days.

All of this is good news for Darden, and it's one of the many reasons why I like the stock here. If you want to fill your portfolio up with satisfying restaurant stocks, you should seriously consider dining with Darden.

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