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Investing.com - UBS has lowered its price target on Darden Restaurants (NYSE:DRI) to $230.00 from $245.00 while maintaining a Buy rating on the stock. According to InvestingPro data, the stock has experienced a significant 13% decline over the past week, with its RSI indicating oversold territory.
The price target adjustment follows Darden’s first-quarter results, which showed solid sales momentum at key brands but lower margins and earnings due to increased labor and other operating expenses. Despite this, the company raised its fiscal year 2026 sales guidance. The company maintains strong fundamentals with an 8.3% revenue growth and a healthy EBITDA of $1.95 billion in the last twelve months. InvestingPro’s analysis reveals the company’s overall financial health score is GOOD, with particularly strong profitability metrics.
UBS noted that both Olive Garden and LongHorn Steakhouse same-store sales outperformed industry benchmarks, with stronger performance in August and continued top-line momentum into the second quarter. The company’s updated fiscal 2026 same-store sales guidance of 2.5-3.5% reflects year-to-date momentum.
Beef costs remain a concern for Darden, with only 25% coverage over the next six months. The company expects the current beef price spike to be unsustainable and has observed some demand destruction in retail recently.
UBS believes Darden is well-positioned to maintain sales and traffic momentum through compelling value offerings, menu innovation, and store expansion plans, with 65 new openings planned for fiscal 2026. The firm projects a long-term 10-15% total shareholder return despite near-term margin pressures. Notable strengths include the company’s 31-year track record of maintaining dividend payments and strong returns over the past decade. Discover more insights about DRI’s growth potential and 12 additional ProTips with a subscription to InvestingPro.
In other recent news, Darden Restaurants reported its first-quarter fiscal 2026 results, which fell short of same-store sales and earnings per share expectations. This has led to several adjustments in stock price targets from various financial firms. Truist Securities lowered its price target for Darden Restaurants to $240, maintaining a Buy rating, while KeyBanc adjusted its target to $225, citing margin concerns but keeping an Overweight rating. TD Cowen also revised its price target to $200, maintaining a Hold rating, and expressed surprise at the stock’s recent decline, attributing it to high expectations for the Olive Garden brand.
Additionally, Darden Restaurants’ board approved a special equity award for CEO Ricardo Cardenas, valued at $17 million, set to vest in 2030 based on performance metrics. The award will be granted in 2025, contingent on the company’s total shareholder return relative to the S&P 500. These developments indicate a mixed outlook for Darden, with analysts showing varied confidence levels in the company’s future performance.
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