Street Calls of the Week
Investing.com - Evercore ISI reiterated an Outperform rating and $250.00 price target on Darden Restaurants (NYSE:DRI) Monday, citing strong growth potential for the company’s Olive Garden and LongHorn Steakhouse brands. The stock, currently trading near its 52-week high of $228.27, has delivered an impressive 52% return over the past year. According to InvestingPro data, the company maintains a GOOD financial health score, though technical indicators suggest the stock may be in overbought territory.
The research firm expects Olive Garden, which represents 45% of Darden’s sales, and LongHorn Steakhouse, accounting for 25% of sales, to achieve over 4% same-store sales growth in fiscal year 2026. This growth is anticipated despite a broader casual dining industry that is projected to see flat to low-single-digit same-store sales increases. The company has demonstrated solid execution, with revenue growing 6.03% over the last twelve months to $12.1 billion. For deeper insights into Darden’s growth metrics and financial performance, InvestingPro subscribers can access the comprehensive Pro Research Report, featuring detailed analysis of 1,400+ top stocks.
Darden’s strategic investments in affordability, including lower-priced menu items at Olive Garden, and increased labor spending are positioned to drive mid-single-digit company-wide sales growth long-term. Evercore ISI forecasts 3.2% same-store sales growth and 2.5% unit growth for fiscal year 2026.
The firm slightly reduced its earnings per share estimates by 1-2% due to these reinvestments, now projecting a 35 basis point year-over-year EBIT expansion versus the previously expected 50 basis point increase. Despite this adjustment, Evercore’s fiscal 2026 and 2027 estimates remain above consensus.
Evercore ISI maintained its $250 price target, representing approximately 21 times fiscal 2027 estimated earnings per share, near the high end of Darden’s five-year next-twelve-months range of 15-22 times. The valuation reflects expectations for 3-4% annual unit growth and 1.5-3.5% same-store sales growth.
In other recent news, Darden Restaurants reported impressive fourth-quarter fiscal 2025 results, surpassing analysts’ expectations. The company achieved an earnings per share of $2.98, exceeding the forecast of $2.94, and reported revenue of $3.3 billion, which also outperformed the anticipated $3.26 billion. Darden’s same-store sales growth was notably strong, with Olive Garden and LongHorn Steakhouse widening their growth gap compared to the casual dining industry. KeyBanc responded to these results by raising its price target for Darden to $245 from $230, maintaining an Overweight rating. The firm highlighted Darden’s effective marketing strategies and partnerships, such as the Buy One, Take One offer at Olive Garden and the Uber (NYSE:UBER) Direct collaboration. Additionally, Darden plans to open 60-65 new restaurants in fiscal 2026, projecting total sales growth of 7-8%. The company also announced its fiscal 2026 guidance, including a diluted EPS range of $10.50-$10.70, with a focus on sustainable growth and innovation.
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