Courtesy of Benzinga.
Darden Restaurants, Inc. (NYSE: DRI), the restaurant operator best known for its Olive Garden and LongHorn Steakhouse chains, reported fiscal third-quarter results Thursday that prompted Stephens to turn bullish on the stock.
The Analyst
Stephens’ Will Slabaugh upgraded Darden Restaurants’ stock rating from Equal-Weight to Overweight with a price target lifted from $95 to $105.
The Thesis
Darden’s Q3 reaffirmed that the company is outperforming the overall restaurant industry, Slabaugh said in a Monday note.
Olive Garden’s streak of positive same-store sales growth now stands at 14 consecutive quarters, and the growth was driven by a 0.1-percent traffic gain and a 1.7-percent pricing increase, the analyst said.
Customers are responding well to the Italian-American restaurant chain’s everyday value offering, to-go ordering and overall menu simplification, Slabaugh said.
Longhorn posted 2-percent same-store sales growth, which did fall short of the 3.5 percent Stephens had projected. Nevertheless, it’s LongHorn’s 20th consecutive quarter of positive same-store sales growth from ongoing penetration in new markets and an overall focus on guest experience, Slabaugh said.
Darden shares are trading at 16.2x CY18 EPS and 14.9x CY19 EPS — which is a below-market multiple for a restaurant operator whose top brands are expected to post consistent 2-percent same-store sales growth, the analyst said. Darden as a whole is likely to issue beat-and-raise earnings reports moving forward, which should prompt the stock to “regain its premium valuation,” he said.
Price Action
Shares of Darden Restaurants were up 2 percent after the open Monday.
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Latest Ratings for DRI
Date | Firm | Action | From | To |
---|---|---|---|---|
Mar 2018 | Stephens & Co. | Upgrades | Equal-Weight | Overweight |
Mar 2018 | Barclays | Maintains | Overweight | Overweight |
Mar 2018 | Deutsche Bank | Maintains | Hold | Hold |
View More Analyst Ratings for DRI
View the Latest Analyst Ratings
Posted-In: LongHorn Steakhouse Olive GardenAnalyst Color Upgrades Price Target Restaurants Analyst Ratings General Best of Benzinga