Darden Analysts Breakdown Q4 Results: Olive Garden Lags, LongHorn Steakhouse Outperforms

Darden Restaurants, Inc. (NYSE:DRI) on Thursday reported better-than-expected results for its fourth quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

BofA Securities On Darden Restaurants

Analyst Sara Senatore maintained a Buy rating, while raising the price target from $180 to $185.

LongHorn Steakhouse's performance has continued to outpace the casual dining industry by 480 basis points (bps) in sales and by 430 bps in transaction growth, Senatore said in a note. "While Olive Garden outpaced the industry on traffic (60 bps), it lagged on sales comps (70 bps) suggesting that it’s not fully offsetting its lower pricing with better traffic," she added.

"We subscribe to Darden’s view that slower input cost growth – commodities and labor – is a natural counterweight to slower demand growth and continue to believe that DRI can meet or exceed its long term growth algorithm, albeit with the balance of growth shifted to margin expansion," the analyst further wrote.

BMO Capital Markets On Darden Restaurants

Analyst Andrew Strelzi reiterated a Market Perform rating and price target of $165.

Darden Restaurants reported quarterly earnings of $2.65 per share, exceeding the Street's $2.61 estimate on stronger restaurant margins, which offset its Olive Garden-driven comp miss, Strelzi said. "Softer low-income consumer and competitive discounting were cited as drivers of comp shortfall," he added.

Management's full-year comps guidance came in below consensus, while their earnings projection was in-line, the analyst stated. "While we appreciate DRI’s long-term focus, its steady approach in a more competitive environment likely will limit OG’s relative performance to peers and DRI’s margin upside," he further wrote.

Check out other analyst stock ratings.

Morgan Stanely On Darden Restaurants

Analyst Brian Harbour reaffirmed an Overweight rating and price target of $175.

The company reported an earnings beat, "as costs were restrained and inflation tame despite soft sales," Harbour said in a note.

"DRI suggested relative stability in m/m trends, and the low end customer continues to cut back on visits y/y (which probably still plays out in the next couple of quarters)," the analyst wrote. There is uncertainty around the near-term sales trends and the company's performance is likely to be backend loaded, he added.

KeyBanc Capital Markets On Darden Restaurants

Analyst Eric Gonzalez maintained an Overweight rating and price target of $170.

Darden Restaurants' same-store sales growth missed expectations, reflecting softness at Olive Garden, Gonzalez said. Despite this, the company maintained a positive same-store sales gap versus industry peers in the quarter, "as conservative pricing drove traffic outperformance at both OG and LH," he added.

Management's full-year outlook implies same-store sales trends will improve as the year progresses "even as OG remains under pressure in the NT," the analyst wrote. "Marketing remains an opportunity for Olive Garden, particularly as its everyday value proposition remains among the most compelling in the segment," he further wrote.

DRI Price Action: Shares of Darden Restaurants had declined by 1.12% to $152.56 at the time of publication on Friday.

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