On Thursday, KeyBanc Capital Markets maintained a positive outlook on Darden Restaurants (NYSE:DRI), reiterating an Overweight rating and a $200.00 price target. The endorsement follows the firm's participation in the ICR Conference in Orlando, where analysts met with various restaurant chains. According to InvestingPro data, 14 analysts have recently revised their earnings upwards for the upcoming period, with price targets ranging from $145 to $230.
The KeyBanc analyst expressed an increased bullish stance on Darden Restaurants, citing the strength of big brands in delivering high-value experiences in the current demand environment. The analysis suggests that Darden Restaurants is undervalued compared to its peers in the full-service, casual-dining sector. The company's strong market position is reflected in its $21.18 billion market capitalization and steady revenue growth of 5.14% over the last twelve months.
The $200 price target set by KeyBanc is derived from a combination of peer group analysis, considering price-to-earnings and EBITDA valuation multiples, and a discounted cash flow analysis. The latter indicates a value of $200 based on a terminal growth rate of 1.9% and a weighted average cost of capital of 8%. This target corresponds to 18.5 times KeyBanc's fiscal year 2026 EPS estimate of $10.81 for Darden Restaurants. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with a P/E ratio of 20.6x and offering a dividend yield of 3.1%.
The analyst highlighted that the target price is nearly aligned with the current forward price-to-earnings average of approximately 20 times for the casual dining group. It is also consistent with Darden Restaurants' historical averages, which are 16.9 times over three years and 18.5 times over five years.
As of the close on January 15, 2025, Darden Restaurants' stock was trading at $108.83. This represents a multiple of roughly 17 times KeyBanc's estimated fiscal year 2026 earnings per share of $10.81, further underscoring the firm's position on the stock's potential for growth.
In other recent news, Darden Restaurants has been in the spotlight due to its impressive earnings and revenue results. The company's second-quarter fiscal year 2025 performance exceeded expectations, with earnings per share of $2.03, slightly above the consensus estimate of $2.02, and a revenue growth of nearly 6% over the last twelve months to $11.4 billion. In addition, Darden's same-store sales grew by 2.4%, surpassing the Street's expectation of 1.4%.
Several financial firms, including BMO Capital, Stephens, Oppenheimer, KeyBanc Capital Markets, Baird, and Raymond (NS:RYMD) James, have raised their price targets for Darden. BMO Capital, for instance, raised the target to $175, citing an increase in sales trend estimates and the application of a roll-forward methodology to fiscal year 2026.
Despite these initiatives, the analyst from BMO Capital noted that Darden's performance relative to the restaurant industry continues to face challenges compared to historical standards. However, the company maintains a strong dividend track record, having paid dividends for 30 consecutive years, with a current yield of 3.05%. These are recent developments in Darden's financial journey.
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