Mizuho Upgrades Darden Restaurants (DRI) to Outperform, Forecasts 5% Same-Store Sales Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5d ago
0mins
Source: seekingalpha
- Rating Upgrade: Mizuho Securities upgraded Darden Restaurants (DRI) from Neutral to Outperform, reflecting optimism about the casual dining sector and the company's potential to benefit from industry trends and specific drivers.
- Sales Forecast Increase: Analyst Nick Setyan raised the Olive Garden's FQ3 same-store sales growth estimate to 5.0%, surpassing the consensus estimate of 4.5%, indicating strong brand performance.
- Margin Improvement: Restaurant-level margins are expected to improve amid cooling inflation and elevated menu pricing, which will further enhance the company's profitability and competitive position in the market.
- Growth Momentum: The accelerated pace of unit growth is seen as a key factor supporting EBITDA and EPS growth, with Mizuho increasing its price target from $195 to $235, reflecting confidence in future performance.
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Analyst Views on DRI
Wall Street analysts forecast DRI stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for DRI is 221.82 USD with a low forecast of 200.00 USD and a high forecast of 261.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
20 Analyst Rating
12 Buy
8 Hold
0 Sell
Moderate Buy
Current: 196.500
Low
200.00
Averages
221.82
High
261.00
Current: 196.500
Low
200.00
Averages
221.82
High
261.00
About DRI
Darden Restaurants, Inc. is a restaurant company. The Company owns and operates full-service dining restaurants in the United States and Canada under the trade names Olive Garden, LongHorn Steakhouse, Yard House, Ruth's Chris Steak House, Cheddar's Scratch Kitchen, The Capital Grille, Chuy's, Seasons 52, Eddie V's and Bahama Breeze. It owns and operates approximately 2,140 restaurants in the United States and Canada. Its segments include Olive Garden, LongHorn Steakhouse, Fine Dining, and Other Businesses. Olive Garden is a full-service Italian dining restaurant operator in the United States. LongHorn Steakhouse is a full-service steakhouse restaurant, which features a variety of menu items including signature steaks and chicken, as well as salmon, shrimp, and burgers. Fine Dining includes Ruth’s Chris, The Capital Grille and Eddie V’s. Other businesses include Cheddar’s Scratch Kitchen, Yard House, Bahama Breeze, Seasons 52, and The Capital Burger.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Service Stocks Underperform in Afternoon Trading
- Service Sector Decline: In afternoon trading on Monday, service stocks fell by 0.3%, with The Trade Desk Inc (TTD) and Darden Restaurants, Inc. (DRI) dropping 8.4% and 5.7% respectively, indicating a weakening trend that may affect investor confidence.
- ETF Performance Analysis: The iShares U.S. Consumer Services ETF (IYC), closely tracking service stocks, declined 0.4% on the day, although it is up 2.17% year-to-date, suggesting that short-term volatility may prompt investors to reassess their strategies.
- Materials Sector Dynamics: The materials sector also showed weakness, with an overall decline of 0.1%, as Builders FirstSource Inc. (BLDR) and Steel Dynamics Inc. (STLD) both fell by 3.1%, reflecting challenges faced by the industry that could impact profitability.
- ETF Tracking Performance: The Materials Select Sector SPDR ETF (XLB), associated with materials stocks, rose 0.3% on the day and is up 10.52% year-to-date, indicating that despite poor individual stock performance, the overall sector still holds some investment appeal.
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Mizuho Upgrades Darden Restaurants (DRI) to Outperform, Forecasts 5% Same-Store Sales Growth
- Rating Upgrade: Mizuho Securities upgraded Darden Restaurants (DRI) from Neutral to Outperform, reflecting optimism about the casual dining sector and the company's potential to benefit from industry trends and specific drivers.
- Sales Forecast Increase: Analyst Nick Setyan raised the Olive Garden's FQ3 same-store sales growth estimate to 5.0%, surpassing the consensus estimate of 4.5%, indicating strong brand performance.
- Margin Improvement: Restaurant-level margins are expected to improve amid cooling inflation and elevated menu pricing, which will further enhance the company's profitability and competitive position in the market.
- Growth Momentum: The accelerated pace of unit growth is seen as a key factor supporting EBITDA and EPS growth, with Mizuho increasing its price target from $195 to $235, reflecting confidence in future performance.
Continue Reading