Citi raises Darden Restaurants stock target by $20, keeps buy rating

On Friday, Citi updated its outlook on Darden Restaurants (NYSE:DRI), increasing the price target to $209.00 from the previous $191.00, while maintaining a Buy rating on the stock. The firm's analysis acknowledges the company's strategic response to market challenges, particularly in the face of competition and a quarter of traffic share loss at its Olive Garden (OG) brand.

The analyst from Citi highlighted Darden Restaurants' recent initiatives, such as the introduction of delivery services and limited-time offers (LTOs), as a positive reaction to an intensely promotional environment among competitors. These efforts are seen as a way to address recent setbacks without negatively affecting the company's economic fundamentals.

According to the analyst, Darden's proactive measures, including the pull forward of the Non-Employee Performance Bonus (NEPB) and the strategies discussed in the first-quarter earnings call, are expected to gradually improve sales and earnings per share. The firm anticipates that the delivery opportunity could provide a low single-digit sales and EPS boost in fiscal year 2026, potentially increasing to a mid-single-digit by fiscal year 2027, though these projections are not currently factored into their estimates.

The report suggests that the clearer path to revenue and profit growth, as outlined by Darden's management, may lead to an expansion of the stock's multiple from its current level. This optimism is based on the company's ability to adapt to market conditions and leverage opportunities for growth.

Citi's revised price target reflects a confidence in Darden Restaurants' strategic direction and potential for increased shareholder value, as the company continues to navigate a competitive landscape and capitalize on emerging business opportunities.

In other recent news, Darden Restaurants reported mixed results for the fiscal year 2025 first quarter. Despite a slight decrease in same-restaurant sales and a dip in guest counts, the company's sales saw a modest 1% increase year-over-year, reaching $2.8 billion.

Adjusted diluted net earnings per share were reported at $1.75, slightly below the previous year. UBS maintained a Buy rating on Darden Restaurants and raised the price target to $195 from $188, highlighting the company's ongoing strategic initiatives to increase customer traffic and sales.

The firm also expressed optimism about Darden's sales momentum and the potential boost from a new partnership with Uber (NYSE:UBER) for delivery services. Darden's acquisition of Chuy's is pending and is expected to be neutral to earnings per share for the fiscal year. Notably, LongHorn Steakhouse outperformed the industry with a 6.5% increase in sales.

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