Darden Restaurants Sees Slew Of Price Target Cuts As Rising Costs Cloud Profit Outlook

Darden Restaurants (DRI) saw multiple Wall Street analysts trim their price targets on the company after the release of first-quarter results, citing that an incremental rise in costs will dampen near-term profitability.

Wells Fargo lowered the firm's price target on Darden to $200 from $225 and maintained an ‘Equal Weight’ rating, according to TheFly. While Darden’s comparable sales were good, weak flow-through is a pinch point into rising beef costs and value investments, the firm noted.

Retail sentiment on Darden improved to ‘extremely bullish’ from ‘bullish’ territory a day ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.

BMO Capital cut its price target on Darden to $205 from $215 and maintained a ‘Market Perform’ rating. The firm noted that casual dining brands have realized traffic growth across income cohorts, and comparable momentum continues quarter-to-date. However, the firm stated it was reducing its estimates to reflect incremental inflation.

On Thursday, Darden reaffirmed its full-year earnings per share (EPS) forecast and anticipates the lowest year-over-year EPS growth to occur in the second quarter, driven by a significant increase in beef costs and a measured approach to pricing these costs.

The company reported first-quarter revenue in line with expectations but missed the profit target for the quarter. BTIG lowered the firm's price target on Darden to $225 from $235 and noted that the company posted a mixed first quarter, with a stellar sales performance, including mid-single-digit comps driven by traffic, and growth across all income cohorts.

However, Bank of America analyst Sara Senatore raised the firm's price target on Darden to $259 from $254 and stated that, while Olive Garden comps were shy of consensus, the underlying dynamics were very encouraging. Darden's strategy of underpricing inflation should continue to serve it well, she added.

Shares of Darden have gained over 3% this year and jumped 13% in the last 12 months.

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