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Investing.com - Raymond (NSE:RYMD) James raised its price target on Darden Restaurants (NYSE:DRI) to $240.00 from $230.00 on Monday while maintaining an Outperform rating following the restaurant group’s stronger-than-expected fiscal fourth-quarter comparable sales. The stock, currently trading at $225.78, is approaching its 52-week high of $228.27, with InvestingPro data indicating the shares may be overvalued at current levels.
The restaurant operator, which owns Olive Garden and LongHorn Steakhouse, posted particularly strong performance at both chains, with Olive Garden reporting 6.9% comparable sales growth and LongHorn achieving 6.7% growth in the quarter. This outperformance has contributed to Darden’s impressive 52.35% total return over the past year, according to InvestingPro data.
Raymond James noted that Olive Garden’s performance has been powered by rising first-party delivery sales, which recently accounted for approximately 5% of the mix, and effective new value strategies that have not negatively impacted the brand’s industry-leading margins. The company maintains a robust gross profit margin of 21.88%, while generating $12.1 billion in revenue over the last twelve months.
The firm highlighted that Darden is operating from a position of strength, with guest satisfaction metrics at all-time highs for both Olive Garden and LongHorn Steakhouse, pricing discipline that has strengthened relative value versus peers, and industry-leading store margins of 20.5%, with Olive Garden above 22%.
Management’s updated long-term framework reflects a renewed focus on top-line growth with annual unit growth of 3-4% and comparable sales growth of 1.5-3.5%, as the company seeks to drive further market share gains by investing in guest experience, value, and marketing.
In other recent news, Darden Restaurants reported strong financial results for the fourth quarter of fiscal year 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $2.98, compared to the forecasted $2.94, and revenue of $3.3 billion, exceeding the anticipated $3.26 billion. The company also announced plans to open 60-65 new restaurants in fiscal 2026. KeyBanc raised its price target for Darden to $245 from $230, maintaining an Overweight rating, following the company’s better-than-expected earnings and same-store sales trends, particularly at Olive Garden and LongHorn Steakhouse. Evercore ISI reiterated an Outperform rating with a $250 price target, highlighting potential growth from Olive Garden and LongHorn Steakhouse, which account for a significant portion of Darden’s sales. Evercore ISI noted strategic investments in affordability and labor, projecting 3.2% same-store sales growth and 2.5% unit growth for fiscal year 2026. Additionally, Darden provided a fiscal 2026 outlook, expecting total sales growth of 7-8% and same restaurant sales growth of 2-3.5%. The company emphasized its long-term strategy, targeting a 10-15% total shareholder return.
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