BofA raises Darden Restaurants stock target to $238, maintains buy

On Friday, BofA Securities analyst Sara Senatore increased the price target for Darden Restaurants (NYSE:DRI) stock to $238 from the previous $230, while reiterating a Buy rating. The stock, currently trading near its 52-week high of $203.47, has delivered an impressive 26.24% return over the past year. According to InvestingPro data, analyst targets for the stock range from $145 to $235, with 10 analysts recently revising their earnings estimates upward. Senatore highlighted that despite a comparable sales (comp) miss in the third fiscal quarter due to industry-wide weather challenges, Darden’s underlying trend remained strong. Excluding weather impacts, same-store sales growth (SSSG) was positive across all four of Darden’s segments. With a market capitalization of $23.31 billion and a P/E ratio of 21.17, Darden has maintained consistent dividend payments for 31 consecutive years, demonstrating remarkable stability. InvestingPro’s comprehensive analysis reveals 8 additional key insights about Darden’s financial health and growth prospects.

The analyst noted that Darden has sustained its momentum into March, with SSSG exceeding 3%. This performance reflects effective execution across the company’s brands and indicates that consumers are willing to pay more for value. Senatore pointed out that promotional items such as the $12.99 Manicotti Limited Time Offer (LTO) had a mix rate of 1%, compared to higher mix rates for Chicken Marsala and Steak Gorgonzola, which exceeded 2%.

Furthermore, Senatore mentioned the promising early results from Olive Garden’s partnership with Uber (NYSE:UBER) Direct. The initiative has seen order volumes double over the quarter, with 40-50% of these orders being incremental. This suggests that delivery could become a consistent driver of comparable sales. Currently, delivery accounts for 2.5% of Olive Garden’s sales, and both Darden and Uber are investing in advertising to support this venture.

The positive assessment from BofA Securities comes as Darden Restaurants continues to demonstrate its ability to navigate industry challenges and capitalize on opportunities to drive growth. The raised price target reflects the firm’s confidence in Darden’s ongoing initiatives and its potential for sustained performance in the competitive restaurant industry.

In other recent news, Darden Restaurants reported third-quarter earnings of $2.80 per share, meeting expectations despite lower-than-anticipated comparable sales at its Olive Garden and LongHorn Steakhouse chains. Analysts from Stifel and BTIG raised their price targets to $215 and $210, respectively, while maintaining a Buy rating, citing confidence in the company’s strategies, including the Uber Direct delivery service. TD Cowen also increased its price target to $190, noting the positive impact of the Uber Direct collaboration on Olive Garden’s same-store sales, though maintaining a Hold rating due to valuation concerns. Jefferies, while raising its target to $165, kept an Underperform rating, expressing caution over Darden’s current valuation and the potential for further upside. Meanwhile, Citi analysts raised their target to $229, highlighting Darden’s strong same-store sales and successful initiatives that contribute to its growth. These developments reflect varied analyst perspectives on Darden’s performance and market position. The company’s efforts to adapt through delivery partnerships and other initiatives are being closely watched by analysts and investors alike.

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