Darden Restaurants' fiscal second-quarter earnings could fall short of Wall Street's estimates, while the company is unlikely to change its full-year bottom-line outlook, as noted in a recent analysis. The parent company of Olive Garden and LongHorn Steakhouse is scheduled to report second-quarter results Thursday.
The earnings expectations have been reduced to $2.01 a share, lagging behind the Street's view of $2.02. Casual dining experienced a solid same-store sales recovery last month after a decline in October. However, Darden seems to have fared weaker compared to its competitors, as outlined in the analysis.
Olive Garden started the quarter strong with robust promotion of the Never Ending Pasta Bowl offer, but performance weakened in October and early November until the Thanksgiving period concluded the three-month timeframe. The growth outlook for Olive Garden has been adjusted to around 1.3% from 1.8%, aligning closely with the Street's expectations. In trading on Tuesday, Darden shares were down 1.4%.
For LongHorn, brand-level traffic and sales trends have been relatively stable, showing modest improvement throughout the quarter compared to the previous three-month period. The company anticipates that LongHorn's second-quarter same-store sales will grow by 4.6%, surpassing the Street's outlook of a 4.2% increase.
The full-year EPS projection has been cut to $9.41 from $9.45, which is still in alignment with the Street's forecast of $9.43 and the company's guidance range of $9.40 to $9.60. The analysis maintains an overweight rating on Darden stock and increased the price target to $193 from $188. Furthermore, the recent acquisition of Tex-Mex restaurant chain Chuy's is expected to be slightly accretive to fiscal year 2026 rather than 2025.
Despite current trends and bottom-line performance not being as impressive, Darden's valuation and potential Olive Garden catalysts, such as its delivery partnership with Uber, are seen as supporting aspects for the stock..