- Raymond James analyst Brian M.Vaccaro reiterated an Outperform rating on the shares of Darden Restaurants Inc DRI with a price target of $160.
- The company is scheduled to release third-quarter earnings on March 23.
- The analyst stands with the above-consensus F3Q comp estimates given stronger than expected January industry comparable sales.
- The analyst believes QTD comparable sales have likely moderated into the low/mid -single-digit percentage range through March.
- The analyst sees recent increases in spot beef prices could potentially cause the company's F4Q COGS inflation to come in slightly higher than previously expected.
- The analyst's blended comparable sales estimate of +10.3% assumes Olive Garden (OG) +11%, Longhorn (LH) +8.5%, Fine Dining +10%, and Other Businesses +11%.
- The analyst said Darden is a high-quality, full-service restaurant company characterized by a portfolio of high AUV/margin brands.
- The analyst added that DRI also has a best-in-class management team, scale, and systems, and a strong balance sheet and cash flow profile.
- Despite intense inflation headwinds exiting the COVID pandemic, the analyst believes the company is well positioned to outperform given many of its brands' strong relative value proposition, benefits of scale, and cost efficiencies realized during COVID that should support higher margins compared to pre-COVID levels.
- The analyst noted that the company is also in a strong balance sheet position, allowing it to return free cash flow to shareholders (more than $1 billion annually) while monitoring acquisition opportunities for future growth vehicles.
- Price Action: DRI shares are trading higher by 1.18% at $150.25 on the last check Monday.
- Photo Via Company
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