On Friday, KeyBanc Capital Markets maintained its Overweight rating and $170.00 stock price target for Darden Restaurants (NYSE:DRI), a leading full-service restaurant company. The firm's analyst held a positive outlook on the stock, expecting Darden to continue as a long-term share gainer in the industry, despite a recent adjustment in the company's near-term sales growth forecast.
The analyst affirmed the fiscal year 2025 earnings per share (EPS) estimates and the $170 price target, suggesting confidence in the company's potential to navigate through varying economic cycles.
The endorsement comes even after a revision of the first quarter fiscal year 2025 same-store sales (SSS) growth estimate to -0.5%, a decrease from the prior estimate of +0.1% and below the consensus of +0.3%. This change was based on proprietary and third-party data.
Despite a noted uneven performance at Olive Garden during the summer, KeyBanc's stance on Darden Restaurants remains unchanged. The analyst cited the company's diverse brand portfolio, significant scale, and credible sales drivers as key factors underpinning its ability to outperform.
The maintained Overweight rating reflects an anticipation of sales growth improvements in future quarters, particularly through a stronger focus on value and national advertising.
KeyBanc's price target of $170 for Darden Restaurants is based on an 18 times multiple of the firm's projected fiscal year 2025 earnings per share. The analyst's outlook suggests a belief in the company's strategic initiatives and its capability to leverage its industry position for sustained growth.
In other recent news, Darden Restaurants has announced significant developments in its business operation, including a noteworthy acquisition and financial performance highlights. Darden recently acquired Chuy's Holdings (NASDAQ:CHUY) for $605 million, adding 101 restaurants across 15 states to its portfolio. This move is expected to be neutral to Darden's earnings per share for fiscal year 2025, signaling a strategic expansion of the company's restaurant brands.
The company also 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. These figures indicate a strong financial performance for Darden.
On the analyst front, BofA Securities reiterated a Buy rating on Darden following the acquisition of Chuy's. However, TD Cowen downgraded its rating to hold due to concerns about sales drivers and potential distractions from Darden's involvement with Chuy's. Jefferies also downgraded Darden's stock citing concerns about near-term fundamentals, while UBS maintained a buy rating for the company.
These are recent developments that investors should take note of as they reflect Darden's ongoing efforts to expand its business and meet investor expectations.
InvestingPro Insights
According to InvestingPro data, Darden Restaurants (NYSE:DRI) holds a market capitalization of $18.72 billion, underscoring its significant presence in the full-service restaurant industry. The company's P/E ratio stands at 18.39, which might be considered high relative to its near-term earnings growth, as reflected by a PEG ratio of 2.81 for the last twelve months as of Q4 2024. This suggests that investors are pricing in a premium for potential growth, aligning with KeyBanc Capital Markets' optimistic long-term outlook on the stock.
InvestingPro Tips highlight that Darden has consistently raised its dividend for the past three years, with a notable dividend yield of 3.55% as of the latest data. This is indicative of the company's commitment to returning value to shareholders, a factor that could appeal to income-focused investors.
Moreover, Darden's revenue growth of 8.6% over the last twelve months as of Q4 2024 demonstrates its ability to expand despite challenging market conditions. It is important to note that while analysts predict profitability for the year, the company's short-term obligations currently exceed its liquid assets, which could be a point of consideration for risk-averse investors.
For readers interested in a deeper dive into Darden Restaurants' financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/DRI, which can provide more comprehensive insights into the company's performance and investment potential.
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