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On Friday, KeyBanc Capital Markets adjusted its outlook on Darden Restaurants (NYSE:DRI), increasing the price target to $194 from $170, while sustaining an Overweight rating on the stock. This adjustment follows Darden's first-quarter fiscal year 2024 results, which showed earnings per share (EPS) and same-store sales (SSS) below the consensus, attributed to a general slowdown in the industry during July. Despite this, the company's SSS decline met investor expectations, and recent positive trends, along with new initiatives, have led management to reconfirm its fiscal year 2025 projections.
Darden's management has expressed confidence in their future financial performance, particularly with the introduction of delivery services through a partnership with Uber (NYSE:UBER) and the potential benefits from the acquisition of Chuy's.
These strategic moves are expected to contribute to a fiscal year 2026 EPS growth that surpasses Darden's long-term target of a 10-15% total shareholder return (TSR). KeyBanc's revised price target is based on 18 times the firm's anticipated fiscal year 2026 EPS.
The firm also made slight upward adjustments to its fiscal year 2025 EPS estimates for Darden, now at $9.48, reflecting an anticipated increase in blended SSS growth. This growth is projected as a result of Darden's intensified focus on price point advertising at its Olive Garden restaurants. The collaboration with Uber for delivery services is anticipated to provide additional momentum to the company's growth trajectory.
Darden Restaurants, which operates popular chains such as Olive Garden, has been navigating the challenges of the current market environment while looking to strengthen its position through partnerships and acquisitions.
The company's reaffirmation of its fiscal year 2025 outlook, despite the industry-wide challenges encountered in the recent quarter, signals a steady path forward.
In other recent news, Darden Restaurants reported a slight 1% increase in sales, reaching $2.8 billion. The company's first-quarter earnings per share (EPS) fell short of expectations by $0.08, settling at $1.75. Despite this, Darden reaffirmed its full-year financial guidance, buoyed by a recovery in sales trends and strategic initiatives such as a new partnership with Uber for delivery services.
Several financial firms have adjusted their price targets for Darden Restaurants. BMO Capital raised its target to $175, Raymond James to $187, and TD Cowen to $165, while Jefferies increased its target to $136. Evercore ISI upgraded the stock to "Outperform" and raised its target to $205, while Piper Sandler maintained a neutral stance with a $177 target.
Darden Restaurants also announced the future acquisition of Chuy's, which is expected to have a neutral impact on earnings per share. This move, along with the new delivery initiative, is part of the company's efforts to navigate a competitive landscape and capitalize on emerging business opportunities. The company's ongoing strategies and future performance will continue to be closely watched by investors.
InvestingPro Insights
As Darden Restaurants (NYSE:DRI) continues to navigate the post-pandemic market, real-time data from InvestingPro underscores the company's financial health and market position. With a solid market capitalization of $20.33 billion, Darden is a major player in the restaurant industry. The company's P/E ratio stands at 19.66, reflecting investor confidence in its earnings potential, albeit trading at a high multiple relative to near-term earnings growth expectations. Additionally, Darden's revenue growth over the last twelve months is notable at 8.6%, signaling a robust recovery and an upward trajectory in sales.
InvestingPro Tips highlight that Darden has maintained its dividend payments for 30 consecutive years, showcasing a commitment to returning value to shareholders. This is further reinforced by the company's dividend yield of 3.52%, which is attractive to income-focused investors. It's also worth mentioning that Darden is trading near its 52-week high, indicative of strong market sentiment. For investors seeking a deeper analysis, InvestingPro offers additional tips on the company's financials and performance metrics.
As Darden leverages its partnership with Uber and other strategic initiatives, these financial metrics and InvestingPro Tips provide a more nuanced understanding of the company's market position and investor expectations. For a comprehensive list of all the tips available, interested parties can visit InvestingPro's full suite of resources.
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