Analyzing Carnival (NYSE:CCL) and Darden Restaurants (NYSE:DRI)

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

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Darden Restaurants	$13.21 billion	1.83	$1.21 billion	$10.38	20.38
Carnival	$26.62 billion	1.15	$2.76 billion	$2.22	10.07

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.

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Darden Restaurants	0	9	18	0	2.67
Carnival	0	6	17	2	2.84

Darden Restaurants presently has a consensus target price of $232.86, suggesting a potential upside of 10.08%. Carnival has a consensus target price of $34.42, suggesting a potential upside of 54.00%. Given Carnival’s stronger consensus rating and higher probable upside, analysts clearly believe Carnival is more favorable than Darden Restaurants.

Dividends

Darden Restaurants pays an annual dividend of $6.48 per share and has a dividend yield of 3.1%. Carnival pays an annual dividend of $0.60 per share and has a dividend yield of 2.7%. Darden Restaurants pays out 62.4% of its earnings in the form of a dividend. Carnival pays out 27.0% 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 raised 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.

Institutional and Insider Ownership

93.6% of Darden Restaurants shares are held by institutional investors. Comparatively, 67.2% of Carnival shares are held by institutional investors. 0.7% of Darden Restaurants shares are held by insiders. Comparatively, 7.9% of Carnival shares are held by 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.

Risk and Volatility

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Darden Restaurants	9.13%	57.44%	9.62%
Carnival	11.24%	26.11%	6.36%

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.

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.