Darden's Collaboration with Uber Sparks Growth Forecasts
Darden's Collaboration with Uber Sparks Growth Forecasts
Recently, Darden Restaurants, Inc. (NYSE: DRI) made headlines by reporting its first-quarter adjusted earnings per share of $1.75, slightly below analyst expectations of $1.83. Furthermore, quarterly sales reached $2.76 billion, which also fell short of the anticipated $2.80 billion.
Analysts Weigh In on Darden's Performance
Financial experts have shared their insights regarding Darden's recent results:
- KeyBanc analyst Eric Gonzalez upgraded the stock's rating to Overweight and raised the price target from $170 to $194.
- BMO Capital Markets’ Andrew Strelzik maintained a Market Perform rating, increasing the price forecast from $165 to $175.
- Wedbush's Nick Setyan reiterated an Outperform rating, adjusting the price target from $170 to $200.
- Piper Sandler analyst Brian Mullan kept a Neutral stance on the stock, lifting the price target from $159 to $177.
- Truist Securities analyst Jake Bartlett maintained a Buy rating, increasing its price forecast from $185 to $195.
Impact of Uber Partnership on Darden's Growth
Gonzalez from KeyBanc anticipates significant growth stemming from Darden's strategic partnership with Uber. He slightly adjusted the FY25 EPS estimate to $9.48, attributing the adjustment to expected increases in same-store sales as Darden places greater emphasis on pricing strategies at Olive Garden. During the holiday season, Darden will pilot delivery service at around 100 Olive Garden locations, intending to expand service throughout the entire network by the end of FY25. Notably, delivery menu prices will align with those for dine-in and takeout, although a $5 delivery fee plus a 5% service charge will apply.
Considerations on Sales Growth and Market Share
Analysts at BMO Capital Markets suggest that while Darden's delivery service could yield additional revenue, there may be limitations. They caution that growth might not match competitors due to existing strength in off-premise sales and a lack of partnership with third-party delivery services. Forecasts predict modest performance for Olive Garden in the latter half of 2025 and a low-single-digit growth spike for FY2026.
Strategic Delivery Expansion
Wedbush analysts highlight Darden's tactical approach to maintaining market share despite external challenges. They indicate the collaboration with Uber, initially starting in 5-6 Olive Garden outlets, will eventually extend to around 100 locations in subsequent quarters leading up to the holidays. This initiative will set the stage for a full rollout across all Olive Garden locations, involving curbside and delivery options by FY25’s conclusion. This partnership is structured as a first-party delivery model without plans for advertisements on Uber Eats.
Financial Implications of Olive Garden's Role
Piper Sandler emphasizes the significance of Olive Garden, which represents about 45% of Darden's revenue and 50% of its segment profit in the upcoming fiscal year. The Uber partnership has the potential to enhance Darden's adjusted earnings per share, particularly benefiting the stock valuation in the near future. Positive market responses already hint at this trend.
Darden's Stock Performance and Future Outlook
As of the latest updates, DRI shares were seen trading at $169.85, reflecting a 1.41% decrease. The overall sentiment among analysts regarding Darden remains optimistic, especially with the recent boosts in same-store sales across its restaurant portfolio since mid-year. By adopting proactive marketing strategies, Darden is positioning itself for stronger performance in FY25.
Frequently Asked Questions
What is the latest earnings report for Darden Restaurants?
Darden reported adjusted earnings per share of $1.75 in its latest quarter, below the analyst estimate of $1.83.
How has the stock price reacted to recent news?
The stock is currently trading at $169.85, seeing a decrease of 1.41% since the earnings announcement.
What is the significance of the partnership with Uber?
The partnership is expected to enhance Darden's market presence and potentially increase adjusted earnings per share via delivery services.
Which analysts have changed their ratings on Darden recently?
Various analysts, including those from KeyBanc and Wedbush, have adjusted their ratings and price forecasts upwards post-earnings announcement.
What does Darden's outlook look like for upcoming quarters?
Analysts express optimism for growth, particularly with anticipated improvements in same-store sales and ongoing execution of delivery services.
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