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Investing.com - Evercore ISI lowered its price target on Darden Restaurants (NYSE:DRI) to $240.00 from $245.00 on Friday, while maintaining an Outperform rating on the stock. The restaurant chain’s shares have declined over 9% in the past week, with InvestingPro data indicating the stock is currently in oversold territory.
The firm cited pricing concerns as the primary reason for the adjustment, noting that Darden’s pricing will trail inflation more than expected. Specifically, Evercore ISI pointed out that Darden’s pricing is in the "high 2% area" compared to inflation of "3-4%." This pricing challenge comes as 17 analysts have recently revised their earnings expectations downward, according to InvestingPro data.
Despite the price target reduction, Evercore ISI believes Darden continues to execute well and remains positioned to deliver same-store sales growth of more than 4% at both Olive Garden (which represents 45% of sales) and LongHorn Steakhouse (25% of sales) in fiscal year 2026.
The revised price target of $240 assumes a price-to-earnings multiple of 21 times the firm’s fiscal year 2027 earnings per share estimate, which reflects the high end of Darden’s five-year next-twelve-months range of 16-21 times.
Evercore ISI also mentioned that it had recently trimmed estimates ahead of earnings due to beef inflation, and is now lowering EPS estimates by an additional 1% based on the pricing versus inflation dynamic.
In other recent news, Darden Restaurants reported its fiscal Q1 2025 earnings, showing a slight miss on both earnings per share (EPS) and revenue compared to analyst forecasts. The company posted an EPS of $1.97, falling short of the anticipated $2, and reported revenue of $3 billion, missing the $3.04 billion forecast. Despite positive comparable sales, these results reflect ongoing challenges for Darden. Wells Fargo maintained its Equal Weight rating on the company but lowered its price target to $200 from $225, citing concerns over weak profit flow-through and rising costs. The financial services firm highlighted that Darden’s restaurant-level margin flow-through was approximately 19%, with an incremental EBIT percentage of 11.5%. Rising beef costs and value investments were noted as contributing factors to these margin pressures. These developments underscore the financial challenges Darden is currently navigating.
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