Argus & Credit Suisse Weigh In On Darden After Q2 Results

• Darden Restaurants, Inc. (NYSE: DRI) announced its second quarter –- fiscal 2016 -- financial results last Friday.
• Earnings of $0.54 per share came in ahead of the Street’s consensus estimate of $0.43 per share, but revenue of $1.609 billion fell slightly short of consensus expectations for $1.6262 billion.
• Despite the slight revenue miss, shares have gained more than 10.5 percent since the results were reported. So, let’s take a look at what Wall Street thinks of the stock now.

A few days after Darden Restaurants reported its second quarter financial results – an earnings beat on a slight revenue miss, a couple of major Wall Street research firms weighed in on the company and its stock.

Argus

In a report issued Wednesday, Argus analyst John Staszak reiterated a Hold rating on shares of Darden, noting that, while second quarter results and guidance were strong (on an overall revenue and comp-store sales rise at Olive Garden, LongHorn Steakhouse, and Capital Grille), the shares seem fully valued at 19.1 times the firm’s revised fiscal 2016 EPS estimate.

Having said this, Argus’ long-term rating on Darden remains a Buy. The firm’s experts believe that stock buyback programs, unit expansion, and further cost-reduction initiative will lead to earnings growth over time. The analysts also think that Darden remains one of the best-managed casual dining companies among those they cover.

Credit Suisse

On the other hand, analysts at Credit Suisse issued an Outperform rating and $68 price target –up from 64- on shares of Darden. They noted that this quarter was the fourth consecutive quarter of substantial upside to consensus as the company “continues to deliver on sales execution and productivity.”

The report pointed out two main elements to take into account here: the company’s top line strength in an environment that continues to be quite challenging, and the incremental savings that drove a margin beat.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.