Darden Restaurants Is Cautious On Industry, Confident In Its Own Stores

Credit Suisse could see Darden Restaurants, Inc. DRI remaining confident about its ability to increase its market share though the company continued to remain cautious about the industry. The firm found that there was no change in the company's perception compared to the previous views.

Analysts Jason West and Jordy Winslow's comments came a day after the company delivered better-than-expected first-quarter results and increasing the forecast for the fiscal year 2017. They maintain their Outperform rating and price target of $69 on the company's shares implying more than 10 percent upside potentials from the current levels.

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The brokerage viewed in a research note, "We came away more confident in the sustainability of off-premise growth as DRI pushes deeper into online ordering, catering, and eventually, delivery. DRI cited a challenging environment in TX (~9 percent of total store base), especially for fine dining, though some of the 1Q weakness related to calendar shifts. We believe DRI's core Florida market (~10 percent of total store base) remained solid, a positive surprise in light of recent tourism-related weakness cited by others."

Credit Suisse pointed out that Darden's share gain in Olive Garden is impressive since it outperformed the Knapp-Track casual dining index by 4.10 percentage points in the first quarter. As far as other brands, the firm found SSS to be below estimates.

On boosting the fiscal year 2017 EPS forecast, the brokerage cited the company's $196 million worth of shares repurchase as the basis for boosting guidance compared to $40 million estimate by its analysts.

At time of writing, Darden was up 1.21 percent at $61.90.

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