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With a market cap of $22.7 billion, Darden Restaurants, Inc. (DRI) is one of the largest full-service dining companies in the U.S. and Canada, operating over 1,700 restaurants across multiple brands. Its portfolio includes well-known names such as Olive Garden, LongHorn Steakhouse, The Capital Grille, and Cheddar’s Scratch Kitchen, offering a diverse range of dining experiences.
Shares of the Olive Garden parent have underperformed the broader market over the past 52 weeks. DRI has risen 19.4% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 22.4%. In addition, shares of DRI are up 3.1% on a YTD basis, compared to SPX’s 4.1% gain.
Focusing more closely, the Orlando, Florida-based company has also lagged behind the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 28.1% return over the past 52 weeks.
Despite reporting weaker-than-expected Q2 adjusted EPS of $2.03, shares of DRI jumped 14.7% on Dec. 19. The company reported total sales of $2.9 billion, surpassing the consensus estimate, driven by a 2.4% increase in same-restaurant sales and contributions from 103 Chuy’s locations and 39 net new restaurants. Additionally, Darden announced a $1 billion share repurchase program. The company’s fiscal 2025 guidance, projecting $12.1 billion in total sales, same-restaurant sales growth, and plans to open 50 - 55 new locations, further fueled investor optimism.
For the fiscal year ending in May 2025, analysts expect DRI’s EPS to grow 7.2% year-over-year to $9.52. The company's earnings surprise history is mixed. It topped the consensus estimates in one of the last four quarters while missing on three other occasions.
Among the 28 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 17 “Strong Buy” ratings, two “Moderate Buy,” eight “Holds,” and one “Moderate Sell.”
This configuration is slightly more bullish than three months ago, with 16 “Strong Buy” ratings on the stock.
On Dec. 21, 2024, BTIG raised DRI’s price target to $205 while maintaining a “Buy" rating, citing stronger-than-expected sales and management’s ability to meet full-year guidance. The firm noted that Q2 results were encouraging despite calendar shifts and weather disruptions affecting sales trends.
As of writing, DRI is trading below the mean price target of $200.93. The Street-high price target of $230 implies a potential upside of 19.8% from the current price levels.
