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On Thursday, Citi analysts demonstrated confidence in Darden Restaurants (NYSE:DRI) by increasing the price target on the company’s shares to $229 from the previous target of $223, while maintaining a Buy rating. The stock, currently trading near its 52-week high of $203.12, has shown strong momentum with a 12.4% return over the past six months. The decision comes as a response to Darden’s strong results and positive outlook, including same-store sales (SSS) exceeding 3% for the fourth fiscal quarter to date. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.
Darden Restaurants, known for its ownership of popular chains such as Olive Garden, has been successfully implementing top-line initiatives that appear to be well-received by consumers. With a market capitalization of $23.35 billion and revenue growth of 5.14% over the last twelve months, these initiatives include promotions, new product introductions, and enhanced convenience. Citi analysts noted that these efforts are contributing to the company’s growth, which is reflected in the company’s strong financial health score on InvestingPro.
The analysis also pointed out that consumers with incomes over $50,000 continue to show a preference for food away from home (FAFH) dining experiences. This trend is bolstered by income growth that is surpassing non-discretionary inflation, indicating that occasion-based dining is more resilient compared to quick, calorie-focused food stops.
Furthermore, Citi’s analysis suggests that chain restaurants are in a strong position to capture market share, especially in the full-service sector, which is highly fragmented. Darden, as the largest player in this space, holds approximately a 5% share. The firm’s strategies and market position are expected to drive double-digit EBITDA growth by fiscal year 2026 and justify a premium multiple compared to its peers. InvestingPro data reveals the company’s impressive track record, including 31 consecutive years of dividend maintenance and a current dividend yield of 2.98%. For deeper insights into Darden’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In summary, the raised price target reflects Citi’s belief in Darden Restaurants’ potential for continued top-line growth, driven by comparable sales and new restaurant openings. This growth trajectory is anticipated to translate into significant earnings before interest, taxes, depreciation, and amortization (EBITDA) growth in the coming years, underpinning the positive outlook for the stock.
In other recent news, Darden Restaurants reported its third-quarter fiscal 2025 earnings, which closely aligned with market expectations despite minor shortfalls. The company posted an earnings per share (EPS) of $2.80, slightly below the forecast of $2.81, and revenue of $3.2 billion, just under the anticipated $3.22 billion. This EPS marks a 6.9% increase from the same quarter last year. Darden’s strategic direction and growth prospects were highlighted by strong performances in key segments, with Olive Garden and LongHorn Steakhouse reporting sales growth of 1.5% and 5.1%, respectively. The acquisition of Chuy’s significantly boosted the "Other Business" segment, contributing to a 20.2% rise in sales. Truist Securities analyst Jake Bartlett maintained a Buy stock rating for Darden, citing a positive outlook with a price target of $212.00. Looking ahead, Darden projects fourth-quarter fiscal 2025 total sales between $3.23 billion and $3.26 billion, surpassing analyst expectations, with same-restaurant sales growth expected to exceed 3%. The company also plans to open 60-65 new restaurants in fiscal 2026, with substantial capital expenditures allocated for new establishments, maintenance, and technology.
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