Argus: Darden Restaurants Among 'Best-Managed' Dining Names

Darden Restaurants, Inc. DRI beat consensus estimates Dec. 19 with its second-quarter EPS of 73 cents and sales of $1.88 billion.

The Analyst

Argus' John Staszak upgraded Darden Restaurants from Hold to Buy with a price target of $108.

The Thesis

Darden's initiatives to price aggressively, lower costs and increase customer traffic at Olive Garden can also be used to improve results at its specialty brands, Staszak said in a Thursday note. (See Staszak's track record here.) 

And Olive Garden's operational efficiency, convenience, dining experience and technology improvements can be transferred to Darden's other brands, the analyst said. Argus expects that Darden's long history of dividend hikes and share buybacks will continue to attract growth-income investors.

Buybacks, unit expansion and further cost reductions will lead to EPS growth over time, Staszak said. The analyst said he sees Darden as one of the best-managed casual dining companies.

In the Dec. 19 quarterly report, Darden increased its fiscal 2018 guidance from $4.38-$4.50 to $4.45-$4.53. Argus increased its fiscal 2018 EPS estimate from $4.44 to $4.60 and its fiscal 2019 EPS from $4.80 to $5.

The Price Action

Darden spiked 8.56 percent after the earnings report, reaching a 52-week high of $98.29. After reaching the 52-week high, it pulled back to $95.56 and is trading flat Thursday. 

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