DRI: Future Margin Expansion Will Rely On Managing Beef Inflation Risks

Darden Restaurants' analyst fair value target edged slightly lower to $221.50, as analysts cite persistent beef inflation and recent earnings misses, which are offset by continued solid sales trends and an overall positive long-term outlook.

Analyst Commentary

Recent street research reveals a range of views on Darden Restaurants following the company's latest quarterly updates. Analysts are weighing the company's consistent sales growth and strong brand positioning against challenges related to cost pressures and earnings performance.

Bullish Takeaways

• Bullish analysts view the recent decline in share price as a potential buying opportunity, noting that Darden's operational execution remains on track and the fundamentals are intact.
• Several analysts highlight an improved long-term sales outlook, crediting strong brand momentum at Olive Garden and effective use of sales drivers such as delivery, promotions, and new menu tests.
• Despite beef and food inflation, Darden continues to achieve modest margin expansion through strategic menu pricing and labor productivity improvements.
• Some price targets were raised based on stronger same-store sales and favorable market multiples. This reflects confidence in the company’s ability to maintain positive comps and grow market share.

Bearish Takeaways

• Bearish analysts are cautious about persistent margin pressures from rising beef costs and potential headwinds from smaller portion menu tests.
• Recent earnings misses and weaker-than-expected quarterly results have led to multiple price target reductions. Elevated Olive Garden expectations may prove difficult to sustain.
• Concerns remain that the post-earnings share price reaction reflects uncertainty around the durability of Darden’s recent growth. Some suggest Q1 could have been a peak.
• The macroeconomic environment is flagged as a risk, as ongoing consumer uncertainty could affect traffic and sales across the restaurant sector.

What's in the News

• Darden Restaurants is scheduled to report quarterly earnings before tomorrow's open. Consensus earnings per share are estimated at $2.01 (Periodical).
• The company has repurchased 23,607 shares between May 26, 2025 and June 18, 2025 for $48 million, completing 3,183,541 shares repurchased under the March 21, 2024 buyback authorization (Key Development).
• Between June 18, 2025 and August 24, 2025, Darden repurchased an additional 66,393 shares for $135 million, making progress under the June 20, 2025 buyback plan (Key Development).
• Darden's new 2026 guidance anticipates total sales growth of 7.5% to 8.5%, same-restaurant sales growth of 2.5% to 3.5%, and diluted net earnings per share from continuing operations between $10.64 and $10.84 (Key Development).

Valuation Changes

• Fair Value Target has edged down slightly, moving from $222.10 to $221.50.
• Discount Rate has decreased modestly, changing from 9.34% to 9.26%.
• Revenue Growth Estimate remains stable, with a slight increase from 5.49% to 5.50%.
• Net Profit Margin has dipped minimally, staying at 10.04%.
• Future P/E Ratio has declined slightly, moving from 22.52x to 22.41x.