Darden Restaurants, a prominent player in the food service sector, might fall short of Wall Street's fiscal first-quarter expectations when it releases its results on Thursday. However, analysts at Oppenheimer have indicated that the company may affirm its outlook for the entire fiscal year, particularly given favorable year-over-year comparisons that are becoming more manageable. According to Oppenheimer’s analysis, they project a slight decline in same-store sales by 0.2% during this quarter.
This figure contrasts with the broader consensus which anticipates stable comparable sales compared to the previous year. Additionally, Oppenheimer has revised its earnings-per-share (EPS) target down to $1.78 from an earlier estimate of $1.85, thus trailing behind the market's expectation of $1.83. Particularly concerning is the anticipated performance of the Olive Garden chain.
Oppenheimer's analysts forecast a decline of 1.5% in same-store sales at Olive Garden, which slightly exceeds the market’s expectation of a 1.3% decrease. The analysts, Brian Bittner and Michael Tamas, have also adjusted their models for fine dining establishments, predicting a 1.5% drop, which is a more pessimistic outlook compared to the consensus estimate of a decline of 1.1%. Despite these challenges, Bittner and Tamas maintain an outperform rating on Darden’s stock and have set a price target at $182.
They caution that the quarterly results are unlikely to catalyze any immediate market action. Nonetheless, the restaurant operator is expected to reaffirm its full-year guidance, buoyed by improving sales trends later in the fiscal year and more lenient comparative metrics. Darden's guidance for fiscal 2025 anticipates same-store sales growth in the range of 1% to 2%, projecting an uptick following the first quarter's results.
Oppenheimer has slightly reduced its fiscal 2025 EPS forecast to $9.48 from $9.50, aligning it closely with average analyst estimates collected by Capital IQ. The company’s guidance suggests an EPS outlook lying between $9.40 and $9.60, exclusive of the anticipated acquisition of Chuy's. Year to date, Darden's stock has not matched the performance of the S&P 500; however, it has surpassed its competitors since late August.
Notably, the stock's valuation shows it trading at what analysts term as 'an interesting discount' when weighed against its historical performance metrics. Furthermore, the premium that Darden shares with competitor Chili's Grill & Bar, owned by Brinker International, has reduced by approximately 30%, presenting a more favorable risk/reward opportunity for investors looking at Darden. Bittner and Tamas also suggest that Darden’s management holds potential avenues to enhance investor sentiment.
They emphasize the efficacy of leveraging more impactful promotional strategies and wisely deploying third-party delivery services to capture additional market share. In terms of recent market data, Darden's stock is currently priced at $160.67, reflecting a change of +0.42, which translates to a percentage increase of +0.26..