Citi Raises Target Price for Darden Restaurants Amid Changes

Citi Increases Price Target for Darden Restaurants

Citi has made an impactful update to its outlook for Darden Restaurants (NYSE: DRI). The investment firm raised its price target from $191.00 to $209.00 while maintaining a strong Buy rating on the company's stock. This adjustment comes as Citi recognizes how Darden has strategically responded to the challenges posed by an increasingly competitive market, especially noting a decline in traffic share at its well-known Olive Garden brand.

Strategic Initiatives to Overcome Challenges

Analyst insights from Citi shed light on the proactive measures Darden Restaurants has undertaken. The introduction of delivery services and limited-time offers (LTOs) are seen as necessary responses amid fierce promotional activities from competitors. These initiatives aim to counter recent setbacks while ensuring the company maintains a solid economic foundation.

Anticipated Improvements in Sales and Earnings

The analyst outlined that Darden's recent steps, including the advance in its Non-Employee Performance Bonus (NEPB), are expected to foster gradual improvements in both sales and earnings per share (EPS). By the fiscal year 2026, the delivery opportunity might yield a low single-digit boost to sales and EPS, potentially growing to a mid-single-digit increase by 2027, although these positive impacts are not yet reflected in current estimates.

Pathway to Revenue and Profit Growth

The report articulates a optimistic outlook on revenue and profit growth as articulated by Darden's management. Their adeptness at navigating market conditions and seizing growth opportunities could lead to an expansion in the stock's multiple from its existing level.

Darden's Strategic Direction and Shareholder Value

Citi's revised price target conveys strong confidence in Darden Restaurants' strategic direction and its capacity to enhance shareholder value. The company is navigating through a competitive landscape while leveraging new business opportunities effectively.

Mixed Results in Recent Fiscal Reports

In other developments, Darden Restaurants reported mixed results for the first quarter of fiscal year 2025. While there was a slight decline in same-restaurant sales and a drop in guest counts, the company nonetheless achieved a modest year-over-year sales increase of 1%, reaching $2.8 billion.

UBS Rating and Partnership Prospects

Adjusted diluted net earnings per share for Darden were reported at $1.75, just missing last year's figures. Similarly, UBS has kept its Buy rating for Darden Restaurants, adjusting its price target from $188 to $195, emphasizing the company's continued strategic initiatives aimed at boosting customer traffic and sales.

Future Growth Opportunities

Additionally, UBS expressed optimism regarding the potential sales momentum driven by Darden's new partnership with Uber (NYSE: UBER) for delivery services. In regard to acquisitions, Darden's planned acquisition of Chuy's is anticipated to have a neutral effect on EPS for the fiscal year. LongHorn Steakhouse has distinguished itself by outperforming the industry with a notable 6.5% increase in sales.

Frequently Asked Questions

What is Citi's new price target for Darden Restaurants?

Citi has raised its price target for Darden Restaurants to $209.00, up from $191.00.

Why did Darden Restaurants' stock rating remain a Buy?

Citi maintained a Buy rating due to Darden's strategic initiatives and ability to adapt to competitive market challenges.

What initiatives did Darden Restaurants implement recently?

Darden introduced delivery services and limited-time offers (LTOs) to attract customers amidst fierce competition.

How did Darden's fiscal results look for the recent quarter?

Darden experienced a mixed fiscal quarter, with a slight decline in same-restaurant sales but a 1% year-over-year increase in total sales.

What is Darden's partnership with Uber?

Darden has partnered with Uber to enhance its delivery services, which is expected to contribute positively to its sales momentum.

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