The Seven Weeks Of Gainsmas

Olive Garden parent Darden Restaurants had a rough July-October after weakness in its flagship brand led to a sales miss and disappointing 2024 guidance. However, today’s second-quarter results gave investors renewed hope that it’s getting back on track. 🤔

The company’s adjusted earnings per share of $1.84 topped the expected $1.74. Revenues were shy of expectations, coming in at $2.73 vs. $2.74 billion. Sales jumped 9.7% YoY, boosted by including Ruth’s Chris Steak House locations following its acquisition. 📈

Total same-restaurant sales rose 2.8% YoY, with Olive Garden sales up 4.1% YoY and LongHorn Steakhouse up 4.9% YoY. However, fine dining sales lagged for another quarter, falling 1.7% YoY.

Executives remain confident in their strategy to profitably grow market share, outperforming the industry in most closely-followed metrics. As such, they raised their full-year fiscal 2024 outlook for adjusted earnings per share from $8.55-$8.85 to $8.75-$8.90. They also expect total inflation of 3.0% to 3.50% and same-restaurant sales growth of 2.5% to 3.0%. 💸

The company also bought the dip in its stock, repurchasing 1.2 million shares for $181 million. It still has $328 million remaining under its current $1 billion repurchase authorization.

$DRI shares were down marginally on the day but have recovered most of their July-October decline from all-time highs. 👍

Stocktwits’ third week of trading competitions ended today, so let’s recap how it went. 👇

This week’s competition was a tight one, with CtheLightTrading snagging the second spot for the third consecutive week. HeyShoe also took the third spot where he sat in week one. Clearly, the two of them are in contention for that top spot, so we’ll keep an eye on them in future weeks. 👀

But, they were unable to knock Fritzi off the top spot, with his bullish bets on the tech sector and broader market paying off. Congrats to him on a nearly 80% gain, and extra kudos for posting all of his trades in real time on his stream. 🤩

We’ll have to wait and see how next week’s competition shakes out; make sure to join or follow along before things get started on Monday!

It’s been about a year since the yield curve popped onto investors’ radars, with us discussing it in October and November of 2022. ◀️

As discussed in our posts, a yield curve inversion is not a perfect indicator of a recession, but it has a pretty good track record. That’s because when short-term rates are above long-term rates, investors believe growth (i.e., inflation) will be higher in the short term than the longer term. As such, they demand a higher yield to hold short-term bonds than long-term ones.

So why is this back on our radar today? Despite the bond market’s epic rebound since late October, long-term yields have fallen faster than short-term ones. As a result, the yield curve’s inversion has deepened and is approaching the lows it set earlier in the year. 📉

So, while the stock market, crypto, and other risk assets continue to party on the prospect of lower nominal interest rates, some analysts say the yield curve suggests we’re not out of the woods yet. However, they admit there doesn’t seem to be a clear catalyst to push the economy into recession and cause the Fed to cut short-term interest rates aggressively. 🤔

In the past, major economic shocks like the financial crisis, a global pandemic, or other overlooked risks were why the economy tipped into recession. Inverted yield curves leave the economy in a vulnerable position but are not in and of themselves the reason for a downturn to begin. In other words, the conditions are set for an economic downturn, but those conditions need a spark to get things going. 🔥

And so far, analysts are unclear what that spark (or risk) will be. We’ll have to wait and see what 2024 brings us. As we saw with 2023 (and every other year to be honest), the market and economy have a habit of surprising us all… 🤷