Barclays reiterated an Overweight rating on Darden Restaurants (NYSE:DRI) with a steady price target of $180.00. The firm anticipates the stock to outperform the market today, with expectations set to be influenced by details from the company's earnings call at 8:30am ET.
The forecast suggests that Darden's performance may be pressured by lower-than-expected comparable sales across most of its segments, except for LongHorn Steakhouse, potentially leading to a shortfall in margins and earnings per share.
Despite these challenges, the firm identified three positive factors for Darden: comparable sales have been improving since July, the company has reaffirmed all of its Fiscal Year 2025 guidance, and a significant partnership with Uber has been announced.
Darden is poised to embark on third-party delivery services through an exclusive, multi-year partnership with Uber, a move long discussed between the company's management and investors.
The terms of the deal with Uber have not been disclosed, but the partnership is set to address past concerns of Darden's management. Olive Garden is slated to be the first brand to pilot this service, with a launch expected in late 2024.
Success in the pilot could lead to a national expansion for Olive Garden by May 2025. It is important to note that orders will be placed through Darden's channels, allowing the company to maintain control over customer data, while Uber will handle the actual delivery process.
In other recent news, Darden Restaurants has seen significant developments in its business strategy and financial performance. The company reported an 8.6% increase in total sales, reaching $11.4 billion for fiscal year 2024, along with adjusted diluted net earnings per share of $8.88.
Darden also announced the acquisition of Chuy's, a chain of full-service Tex-Mex restaurants, for $605 million, a move expected to have a neutral impact on the earnings per share for fiscal year 2025.
Darden Restaurants has embarked on a partnership with Uber Technologies (NYSE:UBER) for exclusive on-demand delivery services, starting with a test program at select Olive Garden locations in late 2024. This collaboration aims to expand Darden's service offerings and cater to the increasing demand for home delivery options.
In the realm of analysts' perspectives, several firms have weighed in on these developments. Citi maintained its Buy rating on Darden shares and set a price target of $191.00, while BTIG reiterated its Buy rating with a price target of $175.00. Baird and KeyBanc Capital Markets upheld their Neutral and Overweight ratings respectively.
However, TD Cowen downgraded its rating to hold due to concerns about sales drivers and potential distractions from Darden's involvement with Chuy's.
InvestingPro Insights
As Barclays maintains a positive outlook on Darden Restaurants with an Overweight rating and a $180.00 price target, it's notable that InvestingPro data reflects a strong financial position for the company. Darden's market capitalization stands at $18.92 billion, underlining its significant presence in the industry. The company's P/E ratio is currently at 18.78, suggesting that investors are willing to pay a higher price for its earnings, which aligns with Barclays' optimistic view. Additionally, Darden has demonstrated solid revenue growth over the last twelve months, at 8.6%, indicating its ability to expand amidst market challenges.
Moreover, two pertinent InvestingPro Tips for Darden include the company's impressive track record of maintaining dividend payments for 30 consecutive years and being profitable over the last twelve months. These factors contribute to investor confidence and may support the stock's potential to outperform the market as anticipated by Barclays. For those seeking more comprehensive analysis, InvestingPro offers additional tips on Darden Restaurants, which can be found at https://www.investing.com/pro/DRI.
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