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On Friday, Piper Sandler maintained a neutral stance on Darden Restaurants (NYSE:NYSE:DRI) with a $177.00 price target. The firm acknowledged Darden's latest financial results for Fiscal 1Q25 and highlighted the company's consistency with its Full Year 2025 guidance. Despite softer same-store sales (SSS) in the quarter, management indicated an uptick in the trend quarter-to-date during their earnings call.
Darden's announcement of a new partnership with UBER for white label delivery was unexpected by investors, according to Piper Sandler. The initiative is set to commence later this year, beginning with Olive Garden, Darden's largest brand by revenue and segment profit. Olive Garden contributed approximately 45% of Darden's revenue in Fiscal Year 2024 and about half of the segment profit.
The collaboration between Darden and UBER is poised to start in the latter part of the current calendar year. The significance of Olive Garden to Darden's overall financial health suggests that the partnership could provide an unforeseen boost to the company's adjusted earnings per share (EPS), especially in future financial periods.
The news of the partnership has prompted a reaction in Darden's stock on Friday, reflecting the market's response to the potential positive impact on the company's adjusted EPS. Piper Sandler's commentary indicates that while the quarterly results met investor expectations, the UBER partnership represents a new development with potential financial benefits for Darden.
In other recent news, Darden Restaurants reported a modest 1% increase in sales, reaching $2.8 billion, despite weaker-than-expected earnings.
The company also announced a pending acquisition of Chuy's, expected to have a neutral impact on earnings per share. In response to these developments, several financial firms have adjusted their projections for Darden. Baird and Stephens raised their targets to $172 and $164 respectively, maintaining neutral stances. Evercore ISI upgraded the company's stock to "Outperform" and increased the price target to $205, citing Darden's potential for profitable sales growth and the introduction of Uber (NYSE:UBER) Eats as a delivery option.
BTIG also maintained a "Buy" rating and increased the price target for Darden, acknowledging the potential of the Uber Eats partnership and the company's sales initiatives. Lastly, Citi raised its price target for Darden, maintaining a "Buy" rating and recognizing the company's strategic responses to market challenges.
InvestingPro Insights
In light of Piper Sandler's neutral stance on Darden Restaurants, it's worth considering additional insights from InvestingPro to gauge the company's financial health and market position. Darden has demonstrated a commitment to shareholder returns, having raised its dividend for three consecutive years, and has maintained dividend payments for 30 consecutive years. Despite concerns over near-term earnings, as indicated by nine analysts revising their earnings downwards for the upcoming period, Darden remains profitable with a return on assets of 9.53% over the last twelve months as of Q4 2024.
InvestingPro data shows Darden with a market cap of $20.48 billion and a P/E ratio of 18.33, which is considered high relative to its near-term earnings growth. The company's Price/Book ratio as of Q4 2024 stands at 9.13, suggesting a premium valuation. However, Darden's consistent dividend growth, reported at 15.7% over the last twelve months as of Q4 2024, along with a dividend yield of 3.52%, may attract investors looking for steady income.
For investors considering Darden's stock, it's currently trading near its 52-week high, with a price percentage of the 52-week high at 97.42%. The partnership with UBER could be a strategic move to enhance earnings, as reflected in the slight uptick in the company's stock price. For a more comprehensive analysis and additional InvestingPro Tips, such as Darden's liquidity position and long-term profitability, readers can visit InvestingPro's dedicated section for Darden Restaurants at https://www.investing.com/pro/DRI, which lists over nine additional tips for potential investors.
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