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Investing.com - Evercore ISI has reduced its price target on Darden Restaurants (NYSE:DRI) to $245.00 from $250.00 while maintaining an Outperform rating on the stock. The restaurant chain, currently trading at $211.85 with a market capitalization of $24.7 billion, shows a P/E ratio of 23.64, indicating a relatively high valuation relative to its growth potential according to InvestingPro analysis.
The firm cited higher food cost inflation as the primary reason for trimming its fiscal year 2026 earnings per share forecast from $10.79 to $10.71, which remains above the consensus estimate of $10.68 and within the company’s guidance range of $10.50-$10.70. Despite these challenges, InvestingPro data shows Darden maintains strong financial health with a ’GOOD’ overall rating, and has consistently paid dividends for 31 consecutive years, currently yielding 2.83%.
Despite the price target reduction, Evercore ISI continues to see potential for more than 15% stock upside, driven by expectations of over 4% same-store sales growth at both Olive Garden and LongHorn Steakhouse, which represent 45% and 25% of Darden’s sales respectively.
The research firm noted that Darden is increasingly reinvesting in affordability initiatives, including lower price point menu items at Olive Garden, along with menu innovations and limited-time offerings to drive customer traffic.
Evercore ISI also highlighted that Darden is currently absorbing higher beef costs, which account for approximately 25% of the company’s food inputs, while the firm will be monitoring for limited-time offerings and menu news as Olive Garden approaches more difficult comparisons in the fourth fiscal quarter.
In other recent news, Darden Restaurants reported fiscal fourth-quarter earnings that slightly exceeded analyst expectations. The company posted adjusted earnings per share of $2.98, just above the consensus estimate of $2.97, and revenue of $3.272 billion, surpassing the expected $3.265 billion. Despite these positive results, Darden provided a conservative outlook for fiscal year 2026. Truist Securities maintained its Buy rating on Darden, with a price target of $252.00, citing optimism about the company’s performance despite concerns over the guidance. BMO Capital also maintained a Market Perform rating with a price target of $215.00, expecting strong fiscal first-quarter results. Melius Research initiated coverage with a Hold rating and a $240.00 price target, noting Darden’s consistent performance in full-service dining. Truist’s analysis suggests Olive Garden may exceed same-store sales expectations, projecting 7.0% growth compared to the consensus of 5.9%. These developments reflect a mix of cautious optimism and confidence among analysts regarding Darden’s future performance.
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