Bernstein reiterates Darden stock rating on improving sales trends

Bernstein SocGen Group has reaffirmed an Outperform rating and $230 price target for Darden Restaurants (NYSE:DRI), citing improving sales trends in the company's first-quarter results. The restaurant chain's sales grew by 5.1%, and adjusted earnings per share rose by 4.1%. EBITDA margin for restaurants remained steady at 18.8%.

Darden has maintained its fiscal 2027 earnings per share guidance between $11.10 and $11.35. With a market cap of $22.69 billion and a P/E ratio of 19.35, the stock appears overvalued according to InvestingPro's Fair Value analysis. The company has a 3.24% dividend yield and has raised its dividend for six consecutive years. Darden's Olive Garden brand showed a 1.0% increase in comparable-store sales, while traffic declined by 2.3%.

Challenges such as the World Cup and concerns over lettuce contributed to a 150 to 200 basis point reduction in guest counts. Meanwhile, LongHorn Steakhouse recorded a 6.8% same-store sales growth, and Fine Dining posted 1.0% comparable sales growth. Yard House became the third brand to surpass $1 billion in sales. Bernstein expects Olive Garden's sales and traffic to continue accelerating into September, raising its same-store sales growth expectations to 3.2% for the second quarter and 3.5% for the third quarter.

Darden reported fiscal 2027 EPS of $2.05, meeting analyst estimates, with sales increasing by 5.1% and adjusted EPS growing by 4.1%. Analyst reactions to the results were mixed, with BMO lowering its price target to $220 and maintaining a Market Perform rating, while JPMorgan maintained an Overweight rating with a $225 price target.

KeyBanc kept an Overweight rating with a $237 target despite LongHorn Steakhouse's same-store sales falling short of expectations. Bernstein SocGen Group's Outperform rating and $230 price target highlight the company's positive momentum, and Mizuho raised its price target to $245, citing a positive growth outlook despite challenges at Olive Garden.