Darden Restaurants Posts Q1 Sales Beat, Analysts Cut Price Target On Profitability Concerns

Shares of Darden Restaurants Inc (NYSE:DR) tanked in early trading on Friday, after the company reported downbeat first quarter results.

Here are some analyst projections:

• TD Cowen analyst Andrew Charles maintained a Hold rating, while reducing the price target from $235 to $200.
• BTIG analyst Peter Saleh reiterated a Buy rating, while trimming the price target from $235 to $225.

Check out other analyst stock ratings.

TD Cowen: Although the magnitude was surprising, the decline in Darden Restaurants' stock was due to "elevated Olive Garden expectations" and the share price appreciation over the last four weeks, Charles said in a note. While Olive Garden outperformed expectations for the second straight quarter, the outperformance gap narrowed to 90 basis points (bps), he added.

Management indicated that the strength in the quarter had continued into September across the portfolio, the analyst stated. The next catalyst could be Olive Garden being added to Uber Technologies Inc's (NYSE:UBER) Uber Eats marketplace, he commented.

BTIG: Darden Restaurants reported mixed first-quarter results, with mid-single-digit comps and "growth across all income cohorts," Saleh said. The company's same-store sales growth of 4.7% came in higher than consensus of 4.4%, he added.

Traffic at Olive Garden and LongHorn grew by 3.6% and 3.2%, respectively. Each franchise outpaced the industry traffic of 2.6%, the analyst wrote. While the company's strategy to under-price competitors is being rewarded by consumers, this impacts profitability in the near term, he further stated.

DRI Price Action: Shares of Darden Restaurants had declined by 3.01% to $187.10 at the time of publication on Friday.

Read More:

• Consumers Flock Back To Restaurants Driving August Sales Jump

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