Truist still positive on Darden stock despite mixed quarterly results By Investing.com

On Thursday, Truist Securities maintained a Buy rating on Darden Restaurants (NYSE:) stock with a steady price target of $185.00. The company reported mixed results for the fourth quarter of fiscal year 2024, with a slight earnings per share (EPS) beat but a miss on same-store sales (SSS). Additionally, Darden provided initial fiscal year 2025 guidance that was somewhat below the consensus.

Despite the year-to-date stock decline of 7.5% and a 14.1% drop from its March peak, Truist views the FY25 guidance as robust, considering the current economic uncertainties, such as slower restaurant spending and increased promotional activities by competitors. With market performance contrasted against the S&P’s gains of 15.0% and 6.9%, investor expectations were modest heading into the earnings announcement.

During the 8:30 am ET earnings call, Truist’s focus was on several key areas: the anticipated SSS trend for FY25 and whether there has been a recent uptick, possible adjustments to marketing or promotional strategies, the ability of menu pricing to offset the total inflation guidance of 3.0%, avenues for margin improvement through labor or general and administrative (G&A) efficiencies, and signs of a better development environment for the company.

Darden Restaurants’ guidance and performance are being closely scrutinized as indicators of the company’s resilience and strategic response to an uncertain macroeconomic climate. The firm’s ability to navigate these challenges and potentially capitalize on market conditions remains a focal point for investors and analysts alike.

In other recent news, Darden Restaurants has been the focus of several analyst revisions following its recent earnings report. The company reported a 6.8% increase in total sales to $3 billion and steady earnings per share (EPS) at $2.62.

Morgan Stanley maintained its Overweight rating on Darden with a price target of $175, aligning with the company’s fiscal year 2025 earnings guidance which surpasses some investors’ expectations. Meanwhile, Citi maintained a ‘Buy’ rating, citing Darden’s EPS beat despite a softer performance at Olive Garden.

Several firms adjusted their price targets for Darden. Deutsche Bank reduced its price target from $183 to $180, citing industry challenges and potential increased marketing expenses. KeyBanc Capital Markets revised its price target down to $170, anticipating a slight dip in the company’s performance. Evercore ISI cut its target to $165, citing a projected slowdown in market share gains for the Olive Garden brand.

Darden plans to open 45 to 50 new restaurants in fiscal 2025, with capital expenditures estimated between $250 million and $300 million. Despite some concerns from Truist Securities about Darden’s development guidance for fiscal year 2025, the company’s strategic focus on profitable sales growth and maintaining off-premise sales stability is expected to navigate through near-term challenges and continue its market share expansion.

InvestingPro Insights

As Darden Restaurants (NYSE:DRI) navigates a mixed earnings report and forward-looking guidance, real-time data from InvestingPro offers additional insights into the company’s financial health and market standing. With a Market Cap of $18.14 billion and a P/E Ratio of 17.73, Darden reflects a significant presence in the industry. Notably, the company has experienced an 8.53% revenue growth over the last twelve months as of Q3 2024, underscoring its ability to increase sales amidst a challenging economic landscape.

InvestingPro Tips highlight that Darden has raised its dividend for three consecutive years and has maintained dividend payments for 30 consecutive years, signaling a commitment to shareholder returns. However, it’s trading at a high Price / Book multiple of 8.32, which could suggest that the stock is valued richly in terms of its net assets. Additionally, analysts have revised their earnings expectations downwards for the upcoming period, indicating potential headwinds or a conservative outlook on performance.

For investors seeking a deeper dive into Darden’s financials and future prospects, there are more InvestingPro Tips available, which could provide valuable context for the company’s strategic moves and market positioning. Interested readers can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to these insights. With these additional metrics and analysis, stakeholders can better assess Darden Restaurants’ potential in a dynamic and competitive sector.

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