On Thursday, Citi reaffirmed its Buy rating on Darden Restaurants (NYSE:DRI) stock with a steady price target of $191.00. The firm's analysis highlighted a balanced earnings report from the company, noting a softer performance at Olive Garden but stronger results from LongHorn Steakhouse.
Darden's earnings per share (EPS) surpassed expectations, and the company's forecast aligns with the lower end of its long-term total shareholder return (TSR) goals and current market projections.
The management's strategy of prioritizing profit over aggressive sales growth through discounts was cited as a reason for the tempered sales and EPS growth, especially at Olive Garden. However, cost management efforts are believed to be safeguarding Darden's long-term profit trajectory, aiming for a TSR of approximately 10% or more.
The affirmation comes in the context of Darden's year-to-date stock performance, which has seen a decline of 7.5% compared to the S&P 500's 15% gain. With fiscal year 2025 guidance meeting investor expectations, Citi anticipates the company's shares will experience an upward trend moving forward.
In other recent news, Darden Restaurants has been the subject of multiple analyst revisions. Deutsche Bank (ETR:DBKGn) adjusted its price target for Darden shares from $183.00 to $180.00, maintaining a Buy rating. The firm anticipates the company's fiscal year 2025 guidance to align with long-term growth projections, with earnings per share (EPS) potentially ranging from $9.30 to $9.60.
KeyBanc Capital Markets reduced its price target to $170, citing revised expectations for Darden's fiscal year 2024 and 2025 EPS and same-store sales (SSS) growth forecasts. Evercore ISI also reduced its price target to $165, anticipating a slowdown in market share gains for the Olive Garden brand. Truist Securities adjusted its price target to $185 following Darden's fiscal third-quarter 2024 results.
Darden reported a 6.8% rise in total sales to $3 billion and steady EPS at $2.62. The company also opened 16 new restaurants in the quarter, contributing to 43 new establishments across 22 states in fiscal 2024. Projections for fiscal 2024 total sales are around $11.4 billion.
In terms of future developments, Darden plans to open 45 to 50 new restaurants in fiscal 2025, with capital expenditures between $250 million and $300 million. Despite some concerns from Truist Securities about Darden's development guidance for the fiscal year 2025, the company's strategic focus on profitable sales growth and maintaining off-premise sales stability is expected to help navigate through near-term challenges and continue its market share expansion.
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