Citi has demonstrated continued confidence in Darden Restaurants (NYSE: NYSE:DRI) by maintaining a Buy rating on the stock, albeit with a slightly reduced price target of $191.00, down from $192.00.
The firm's analysts anticipate a mixed performance from Darden Restaurants, noting that the company, particularly its Olive Garden chain, has not been immune to a decline in overall spending in the sector.
The report pointed out that despite softer sales, Darden Restaurants has engaged in thoughtful cost management, which has allowed it to reaffirm its fiscal year 2025 earnings per share targets.
The company is also actively working on strategies to boost customer traffic in response to a fluctuating economic environment, including the advancement of its Never Ending Pasta Bowl (NEPB) promotion.
Darden's strategic choice to avoid deep discounts and promotions at Olive Garden was noted as a factor that likely affected first-quarter sales. However, cost-saving measures have been identified as key to maintaining the company's earnings per share guidance for fiscal year 2025.
The analysis suggests that at approximately 10 times its calendar year 2025 estimated EBITDA, or about 16 times its price-to-earnings ratio, Darden's stock price reflects a conservative near-term outlook.
KeyBanc Capital Markets maintained its Overweight rating and $170.00 stock price target for Darden, citing confidence in the company's potential to navigate through varying economic cycles. BofA Securities also reiterated a Buy rating and a price target of $187.00, following the Chuy's acquisition. However, TD Cowen downgraded its rating to hold due to concerns about sales drivers and potential distractions from Darden's involvement with Chuy's.
Darden reported an 8.6% increase in total sales to $11.4 billion for fiscal year 2024, with an adjusted diluted net earnings per share of $8.88.
On the other hand, Piper Sandler adjusted the stock price target for Darden to $159 from the previous $163 while maintaining a Neutral rating on the company's stock. Lastly, UBS reaffirmed its positive stance on Darden, maintaining a Buy rating and a $188.00 price target.
InvestingPro Insights
As Darden Restaurants (NYSE:DRI) navigates the challenges of a dynamic economic landscape, real-time data from InvestingPro provides key insights into the company's financial health and market performance. With a market capitalization of $18.64 billion, Darden demonstrates significant size within the industry. The company's commitment to shareholder returns is evident, as it has not only maintained but also increased its dividend payments over the last 30 years, with a notable dividend yield of 3.56% as of the last twelve months ending in Q4 2024. This dedication to consistent dividends is underscored by a 15.7% dividend growth during the same period.
While Darden's P/E ratio stands at 18.31, indicating a premium valuation relative to near-term earnings growth, the company's profitability over the past year suggests a stable financial footing. Investors should note that Darden is trading at a high Price / Book multiple of 8.31, which may warrant closer examination of the company's asset valuation and equity position. Despite these valuation metrics, analysts predict the company will remain profitable this year, an optimism reflected in the 10.01% one-month price total return.
For investors seeking a more comprehensive analysis, additional InvestingPro Tips are available, detailing further aspects of Darden's financial performance and market outlook. These tips, which include insights on short-term obligations versus liquid assets and the company's PEG ratio, can be found at https://www.investing.com/pro/DRI, offering a deeper dive into Darden's investment potential.
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