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On Monday, Piper Sandler adjusted the stock price target for Darden Restaurants (NYSE:NYSE:DRI) to $159 from the previous $163 while maintaining a Neutral rating on the company's stock. The adjustment follows Darden's recent announcement earlier in the past week about the definitive agreement to acquire Chuy's Holdings (NASDAQ:CHUY) for approximately $605 million.
Darden Restaurants has agreed to pay $37.50 per share for Chuy's Holdings, which indicates an implied multiple of 10.3x based on Chuy's last twelve months (LTM) transaction-adjusted EBITDA. This multiple is anticipated to drop to approximately 8.2x when potential synergies are factored in. The deal, which will be financed through Darden's existing cash and liquidity, is an all-cash transaction.
The acquisition is expected to enhance Darden's portfolio, with the transaction slated for completion in the second quarter of Darden's Fiscal Year 2025. The addition of Chuy's Holdings into Darden's brand lineup is a strategic move that will potentially yield financial benefits due to the synergies mentioned in the acquisition details.
Darden Restaurants, a leading full-service restaurant company, operates a variety of dining brands and is now set to include Chuy's, a Tex-Mex concept, in its roster. The financial strategy for the acquisition demonstrates Darden's capability to leverage its existing financial resources to facilitate growth through strategic purchases.
In other recent news, Darden Restaurants, Inc. has made significant strides in its business operations. The company reported an 8.6% increase in total sales to $11.4 billion for fiscal year 2024, exceeding expectations, and an adjusted diluted net earnings per share of $8.88. Darden also recently announced its acquisition of Chuy's Holdings for $605 million, adding 101 new restaurants to its portfolio.
Still, Jefferies downgraded Darden's stock from Hold to Underperform, citing concerns about the company's near-term fundamentals. The downgrade is attributed to potential market share loss and diminishing benefits from the pandemic's impact on industry capacity.
These developments come as part of the company's recent strategic moves. Darden is set to complete the Chuy's acquisition by the second fiscal quarter of 2025. The company anticipates the acquisition to have a neutral impact on fiscal year 2025 earnings per share.
Looking forward, Darden's guidance for fiscal year 2025 includes a same-restaurant sales growth of 1% to 2% and a total sales growth driven by same restaurant sales and new restaurant growth. The company also underwent leadership changes to further enhance its brand positioning.
These recent developments reflect Darden's ongoing efforts to expand its business and meet investor expectations.
InvestingPro Insights
As Darden Restaurants (NYSE:DRI) navigates the acquisition of Chuy's Holdings, investors might find the current financial metrics and analyst insights from InvestingPro particularly informative. With a market capitalization of $16.65 billion and a P/E ratio standing at 16.75, Darden reflects a substantial presence in the restaurant industry.
The company's revenue growth over the last twelve months is notable at 8.6%, showcasing its ability to expand financially. Moreover, Darden's gross profit margin during the same period was 21.16%, which could signal operational efficiency that may benefit the integration of Chuy's into its portfolio.
InvestingPro Tips reveal that Darden has consistently maintained dividend payments for 30 consecutive years and has increased its dividend for the past three years, which could be appealing to income-focused investors.
The company is trading near its 52-week low, potentially offering a more attractive entry point for investors considering the stock's historical performance. For those interested in more in-depth analysis, there are additional InvestingPro Tips available that could further guide investment decisions. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription for access to these valuable insights.
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