Darden Restaurants' Strong Performance and Confidence in Future Growth

Darden Restaurants, Inc. (NYSE: DRI) saw its shares trading relatively flat earlier today. The company announced its adjusted earnings per share for the second quarter at $2.03, which exceeded analysts’ expectations of $2.02.

Moving forward, Darden Restaurants has updated its guidance for fiscal year 2025, projecting total sales to reach approximately $12.1 billion, up from the previous forecast of $11.8 billion to $11.9 billion. The company also reaffirmed its expectation for diluted net earnings per share from continuing operations to range between $9.40 and $9.60.

After the results were disclosed, several analysts shared their perspectives on Darden Restaurants' stock:

• BofA Securities analyst Sara Senatore maintained a Buy rating, raising the price target from $195 to $211.
• Goldman Sachs analyst Christine Cho kept a Neutral rating while increasing the price objective to $193 from $183.
• Stephens analyst Jim Salera reiterated an Equal-Weight rating, upping the price forecast to $175 from $164.
• Truist Securities analyst Jake Bartlett also reiterated a Buy rating, raising the price target to $200 from $195.
• Oppenheimer analyst Brian Bittner maintained an Outperform rating and increased the price forecast to $200 from $182.
• Wedbush analyst Nick Setyan kept an Outperform rating while increasing the price target significantly from $200 to $220.
• KeyBanc Capital Markets analyst Eric Gonzalez maintained an Overweight rating and raised the price forecast to $200 from $194.

Insights from Analysts:

BofA Securities analyst Senatore indicated that Olive Garden's comparable sales will remain positive through the second half of 2025, driven by increased marketing and new growth initiatives, including the anticipated rollout of a delivery service in partnership with Uber Technologies, Inc.. Early tests at 100 locations have shown promising results, with larger average order sizes noted.

On the other hand, the Fine Dining segment is facing challenges, as evidenced by a reported 3.8% decline in comparable sales. Nevertheless, this trend aligns with a shift in consumer spending among households earning below $150,000, according to Senatore.

Goldman Sachs: The analysts at Goldman Sachs believe that Darden Restaurants will continue to thrive due to its operational scale, strong brands like LongHorn, and a diversified portfolio. However, they remain cautious about Olive Garden’s performance and customer traffic in Fine Dining. The partnership with Uber is seen as a potential avenue for additional advertising revenue, though full promotional efforts will not begin until 2025 or early 2026.

Stephens: In light of the quarterly results, Stephens revised its adjusted earnings estimates for fiscal year 2025 from $9.38 to $9.40, and for EBITDA from $1.939 billion to $1.962 billion. Estimates for fiscal year 2026 have also been adjusted upwards.

Truist Securities: Truist analysts highlighted that Olive Garden has demonstrated stronger-than-expected same-store sales, boosting confidence in the brand’s market share growth through disciplined marketing efforts.

Oppenheimer: Analysts there raised their earnings per share estimates for fiscal years 2025 and 2026, noting potential for positive revisions as new sales strategies are implemented.

Wedbush: The analyst team's perspective is that Darden Restaurants will continue to capture market share despite a challenging consumer landscape, reinforcing their long-term growth confidence.

KeyBanc Capital Markets: The analysts express concerns over the Fine Dining segment but affirm that Darden's diverse restaurant portfolio will help mitigate these risks. They also mentioned an expedited rollout of the Uber delivery partnership.

Price Movement: At the last check, DRI shares were up by 1.92%, trading at approximately $186.96.

Conclusion: Darden Restaurants appears well-positioned to navigate challenges in the fine dining sector, with a diversified portfolio and strategic partnerships. Analysts’ optimism is reflected in raised price targets and revised earnings forecasts, suggesting a positive outlook for the company’s stock performance.

Darden, Earnings, Analysts, Stock, Restaurants