On Thursday, Baird raised the price target for Chuy's Holdings (NASDAQ:CHUY) shares to $38.00, up from the previous target of $26.00, while keeping a Neutral rating on the stock. This adjustment comes in response to Chuy's agreement to be acquired by Darden Restaurants, Inc. (NYSE:DRI) for $37.50 per share.
The acquisition terms set the value of Chuy's Holdings at a trailing Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) multiple of 10.3 times and a next twelve months (NTM) EV/EBITDA multiple of 10.2 times.
The transaction between Chuy's Holdings and DRI is expected to proceed smoothly, with no competing bids anticipated. The finalization of the deal is slated for completion during Darden's fiscal second quarter, which spans from September to November.
The acquisition price reflects the value that DRI sees in Chuy's Holdings, with the offer standing slightly below the newly adjusted price target from Baird. The deal is a significant event for Chuy's Holdings, representing a strategic shift for the company as it joins the DRI family of restaurants.
Investors and stakeholders of Chuy's Holdings are now looking ahead to the upcoming months when the acquisition is projected to be finalized. The announcement has set clear expectations for the market, with the deal's parameters now publicly outlined by the involved parties.
In other recent news, Darden Restaurants has announced plans to acquire Chuy's Holdings in a $605 million deal. This acquisition will add Chuy's 101 restaurants across 15 states to Darden's existing portfolio.
The transaction, approved by both companies' boards, is expected to have a neutral impact on Darden's earnings per share for fiscal 2025. The total pre-tax costs associated with the acquisition and integration are anticipated to range from $50 million to $55 million.
In related developments, Jefferies has downgraded Chuy's Holdings stock from Buy to Hold due to projected sales and traffic performance lagging behind competitors. Stifel and Piper Sandler have also reduced their price targets for Chuy's following a mixed quarter. Despite these downgrades, Chuy's Holdings reported an earnings per share (EPS) of $0.42, surpassing both Stifel's and the consensus estimate of $0.36.
Chuy's Holdings recently reported Q1 2024 earnings with a slight decrease in revenue to $110.5 million, primarily due to a calendar shift. Despite this, the company's off-premise business grew to represent about 29% of total revenue.
Looking ahead, Chuy's plans to open 6-8 new restaurants in 2024 and expects to see improved trends in the second half of the year as new off-premise initiatives take hold and new menu items attract customers.
InvestingPro Insights
In light of Baird's revised price target for Chuy's Holdings and its impending acquisition by Darden Restaurants, Inc., current market data from InvestingPro offers additional context for investors. With Chuy's management actively repurchasing shares, it reflects a confidence in the company's value, aligning with the acquisition's positive outlook. Moreover, Chuy's is trading at a low P/E ratio of 14.87, which is attractive relative to its near-term earnings growth, suggesting that the stock may be undervalued.
InvestingPro Data indicates that Chuy's Holdings boasts a robust financial position with a market capitalization of $435.41M and a revenue growth of 5.77% over the last twelve months as of Q1 2024. Additionally, the company's liquid assets surpass short-term obligations, providing financial stability as it transitions under Darden's umbrella. For a more comprehensive analysis, investors can explore a total of seven InvestingPro Tips, which provide deeper insights into Chuy's performance and potential. To access these tips and enhance investment strategies, utilize the exclusive coupon code PRONEWS24 to receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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