Reviewing Darden Restaurants (NYSE:DRI) & Carnival (NYSE:CCL)

Carnival (NYSE:CCL) and Darden Restaurants (NYSE:DRI) are both large-cap consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, valuation, risk, earnings, profitability, institutional ownership and analyst recommendations.

Earnings & Valuation

This table compares Carnival and Darden Restaurants”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Carnival	$26.62 billion	1.15	$2.76 billion	$2.22	10.03
Darden Restaurants	$13.21 billion	1.72	$1.21 billion	$10.23	19.49

Carnival has higher revenue and earnings than Darden Restaurants. Carnival is trading at a lower price-to-earnings ratio than Darden Restaurants, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Carnival and Darden Restaurants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Carnival	11.24%	26.11%	6.36%
Darden Restaurants	8.85%	58.64%	9.56%

Dividends

Carnival pays an annual dividend of $0.60 per share and has a dividend yield of 2.7%. Darden Restaurants pays an annual dividend of $6.48 per share and has a dividend yield of 3.2%. Carnival pays out 27.0% of its earnings in the form of a dividend. Darden Restaurants pays out 63.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Darden Restaurants has increased its dividend for 4 consecutive years. Darden Restaurants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings for Carnival and Darden Restaurants, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Carnival	0	6	19	1	2.81
Darden Restaurants	0	9	18	0	2.67

Carnival presently has a consensus target price of $34.45, suggesting a potential upside of 54.63%. Darden Restaurants has a consensus target price of $232.38, suggesting a potential upside of 16.53%. Given Carnival’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Carnival is more favorable than Darden Restaurants.

Risk and Volatility

Carnival has a beta of 2.31, meaning that its share price is 131% more volatile than the S&P 500. Comparatively, Darden Restaurants has a beta of 0.6, meaning that its share price is 40% less volatile than the S&P 500.

Institutional and Insider Ownership

67.2% of Carnival shares are owned by institutional investors. Comparatively, 93.6% of Darden Restaurants shares are owned by institutional investors. 7.9% of Carnival shares are owned by company insiders. Comparatively, 0.7% of Darden Restaurants shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Carnival beats Darden Restaurants on 10 of the 18 factors compared between the two stocks.

About Carnival

Carnival Corp. engages in the operation of cruise ships. It operates through the following business segments: North America and Australia (NAA) Cruise, Europe and Asia (EA) Cruise Operations, Cruise Support, and Tour and Others. The North America and Australia (NAA) Cruise segment includes the Carnival Cruise Line, Holland America Line, Princess Cruises, and Seabourn. The Europe and Asia (EA) Cruise Operations segment consists of AIDA, Costa, Cunard, and P&O Cruises (UK). The Cruise Support segment represents port destinations and private islands for the benefit of its cruise brands. The Tour and Other segment operates hotel and transportation operations of Holland America Princess Alaska Tours. The company was founded in 1972 and is headquartered in Miami, FL.

About Darden Restaurants

Darden Restaurants, Inc., together with its subsidiaries, owns and operates full-service restaurants in the United States and Canada. It operates under Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s Prime Seafood, and Capital Burger brand names. Darden Restaurants, Inc. was incorporated in 1995 and is based in Orlando, Florida.