Darden Restaurants Olive Garden Growth Drive Optimism Amid Valuation Concerns: Analyst

Darden Restaurants Inc DRI reported its third-quarter earnings yesterday. Sales of $3.158 billion missed the consensus estimate.

The following are the comments from different analysts regarding the company’s performance.

Oppenheimer analyst Brian Bittner reiterated an Outperform rating on the shares and raised the price forecast from $218.00 to $230.00.

The analyst is optimistic that DRI’s fiscal 2026 will provide catalysts for growth, surpassing conservative Street expectations. Following a mixed third quarter, same-store sales trends for the fourth quarter have picked up, now exceeding 3% (compared to the Street’s 2.5%), even before the implementation of enhanced marketing efforts tied to Olive Garden’s new delivery service.

After a thorough review of the model, the analyst has slightly raised the EPS projections through 2026E (25E/’ 26E EPS to $9.50/$10.77 from $9.48/$10.74), with the potential for further upward revisions.

The analyst notes that a combination of new sales drivers and overly cautious margin projections will set the stage for positive revisions in the next 12 months.

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Wedbush analyst Nick Setyan reiterated an Outperform rating on the shares and raised the price target from $220.00 to $235.00.

Despite weather-related challenges affecting same-store sales growth, EPS showed upside, said the analyst.

The analyst notes the upper range of EPS guidance is achievable. The fourth-quarter EPS guidance is $2.88–2.95, compared to the consensus of $2.93.

With expected commodity inflation around 3%, labor inflation around 3.5%, menu pricing increases of approximately 2% at Olive Garden and 3% at LongHorn, and visibility for additional SSS growth, the analyst considers the higher end of the EPS range realistic.

TD Securities analyst Andrew Charles reiterated a Hold rating on the shares and raised the price forecast from $180.00 to $190.00.

Darden’s shares reacted positively to the fourth-quarter same-store sales guidance of 3%+, which is currently tracking at that level.

The company is benefiting from a spring rebound in full-service dining after weather-impacted months. However, given soft consumer sentiment, the analyst is less confident in the rebound’s longevity.

The analyst seeks more proof that Darden’s strategies to boost Olive Garden will lead to market share growth despite the premium valuation of its shares.

While the Uber Direct partnership is contributing a 1%-1.25% lift to Olive Garden’s SSS, the peak 13x FY2 EV/EBITDA suggests a $230/share price, indicating a better risk/reward opportunity in other sector stocks.

Stephens & Co. analyst Jim Salera reiterated an Equal Weight on the shares and raised the price forecast from $175.00 to $178.00.

Darden reported same-store sales below expectations but beat on adjusted EPS. Weather and holiday timing would have resulted in a sales beat, said the analyst.

Investors were encouraged by Darden reaffirming its FY25 same-store sales guidance, supported by strong March trends.

While the analyst remains positive on the company’s operational execution and scale, the current valuation is fully priced.

Price Action: DRI shares traded higher by 0.32% at $199.65 at last check Friday.

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