Sterne Agee Maintains Buy Rating, $55 PT On DRI

Sterne Agee is maintaining its Buy rating and $55 PT on shares of Darden Restaurants, Inc. DRI. “After the close on 3/24, Darden Restaurants, Inc. announced fiscal 3Q results of $1.08, which slightly exceeded consensus and our EPS estimate of $1.05,” Sterne Agee writes. “Revenues and the Company's restaurant-level margin were slightly better than we had forecast. However, this was more than counteracted by much higher than expected SG&A vs. our projection. Therefore, we estimate that a favorable tax rate was the primary driver of the upside in the quarter. “On a same-store sales (SSS) basis, Red Lobster improved and LongHorn posted strong results. However, Olive Garden came in slightly below our expectations as the Company noted that its February promotion was not as strong as expected. In summary, our investment thesis on DRI remains intact given the following: 1) Attractive valuation (12.7x our FY12 estimate); 2) Differentiated core brands; 3) Strong operating expertise; and 4) Superior marketing capability.” Darden Restaurants currently trades at $47.03.