Last Update 08 Jan 26

Fair value Decreased 0.045%

DRI: Future Returns Will Depend On Beef Tariffs And Casual Dining Resilience

Narrative Update

The updated analyst price work on Darden Restaurants implies a marginal trim of about US$0.10 to fair value, to US$220.57, as analysts factor in recent price target cuts, mixed ratings, and a tougher 2026 setup for casual dining demand and margins.

Analyst Commentary

Recent research on Darden Restaurants gives you a mixed but useful snapshot of how the Street is weighing the 2026 setup for casual dining against Darden's current execution and valuation.

Bullish Takeaways

Bullish analysts are willing to lift fair value markers, with one price target moving up to US$220 from US$205. This suggests they see current execution and balance sheet strength as broadly supporting the stock at around the updated fair value range.
The Overweight rating paired with a US$227 price target points to confidence that Darden can still outperform parts of the restaurant group, even as the broader sector faces sales pressure and shifting traffic toward quick service.
Some bulls see Darden's scale and portfolio of brands as relatively well positioned to handle consumer spending pressure and margin constraints compared to smaller or less diversified peers.
Maintaining positive or neutral ratings alongside trimmed or modestly raised targets indicates that supportive analysts view recent stock weakness and earnings resets as already reflected in many valuation models.

Bearish Takeaways

Bearish analysts highlight a tough 2026 backdrop, calling out ongoing consumer spending pressure, margin constraints, and store closure risk, which could limit earnings growth and keep P/E multiples in check.
Concerns around a "lack of sales drivers" and the difficulty of lapping last year's demand drivers point to questions about Darden's ability to generate same store sales growth without leaning harder on pricing.
Commentary that Olive Garden's everyday value positioning has only led to modest outperformance suggests that value alone may not be enough to materially shift traffic trends in casual dining.
The downgrade to a more neutral stance and a price target of US$207, down from US$240, signals caution that, even if the business remains solid, upside to fair value could be limited if sector headwinds persist into 2026.

What's in the News

President Donald Trump is expected to sign an order reducing tariffs on beef, tomatoes, coffee and bananas, which could affect input costs and pricing for restaurant operators including Darden Restaurants (Bloomberg).
Darden Restaurants, Inc. expects to open 65 to 70 new restaurants in fiscal 2026, indicating planned unit growth across its portfolio of brands (company update).
From August 25, 2025 to November 23, 2025, Darden repurchased 1,180,363 shares for US$221.46m, completing a total buyback of 1,246,756 shares for US$356.46m under the program announced on June 20, 2025 (company update).
Darden updated fiscal 2026 guidance, with total sales growth expected in a range of 8.5% to 9.3%, including about 2% related to a 53rd week, and same restaurant sales growth expected in a range of 3.5% to 4.3% (company guidance).

Valuation Changes

Fair Value: Trimmed slightly from US$220.67 to US$220.57 per share, a move of about US$0.10.
Discount Rate: Increased from 9.31% to 9.33%, indicating a modestly higher required return in the updated work.
Revenue Growth: Revised from 5.52% to 5.88%, reflecting a slightly higher top line growth assumption in the new model.
Net Profit Margin: Adjusted from 10.03% to 9.89%, a small reduction in expected profitability on future sales.
Future P/E: Reduced from 22.35x to 21.27x, implying a lower valuation multiple in the updated assumptions.

Seamless integration of Uber Direct in Olive Garden locations enhances convenience, expected to boost sales and average check size over time.
Smaller prototypes for Yard House and Cheddar's Scratch Kitchen reduce costs and speed up openings, potentially accelerating unit growth and earnings.
Declining guest counts and economic factors could pressure revenue growth, while operational complexities and supply chain disruptions threaten net margins.

Catalysts

About Darden Restaurants

Owns and operates full-service restaurants in the United States and Canada.What are the underlying business or industry changes driving this perspective?

Olive Garden's rollout of Uber Direct delivery service has been seamless and is now available in nearly all locations. This provides a meaningful sales-building opportunity over time as consumers increasingly opt for convenience, potentially boosting revenue and average check size.
LongHorn Steakhouse's emphasis on quality and culture, such as the Grill Master Legend's program, continues to drive momentum. This level of focus has resulted in all-time high quality scores, potentially leading to increased customer loyalty and stronger comparable sales, positively impacting net margins.
Darden is testing new smaller prototypes for some brands, such as Yard House and Cheddar's Scratch Kitchen. These prototypes lower construction costs and expedite new restaurant openings, enabling a potential acceleration in unit growth which should enhance revenue and earnings.
The integration of Chuy's into Darden's operations promises efficiencies such as streamlined HR and supply chain processes, which could yield productivity gains and improve net earnings.
Darden's strategic reintroduction of popular Olive Garden promotions, like the buy one take one offer and limited-time menu items, aims to drive foot traffic and maintain consumer interest, likely boosting revenue while leveraging existing menu items to maintain net margins.

Darden Restaurants Earnings and Revenue Growth

Darden Restaurants Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Darden Restaurants's revenue will grow by 5.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.7% today to 10.0% in 3 years time.
Analysts expect earnings to reach $1.4 billion (and earnings per share of $12.64) by about September 2028, up from $1.1 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.5x on those 2028 earnings, up from 23.5x today. This future PE is greater than the current PE for the US Hospitality industry at 23.9x.
Analysts expect the number of shares outstanding to decline by 0.4% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.28%, as per the Simply Wall St company report.

Darden Restaurants Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The casual dining industry is experiencing a decline in average same-restaurant guest counts, which may be indicative of underlying consumer spending challenges or shifts in dining preferences, potentially impacting Darden's future revenue growth.
Despite the delivery channel rollout, the incrementality of delivery orders is still relatively low (40-50%), and the increase in operational complexity could pressure net margins if it fails to scale efficiently.
Economic factors, such as the decline in consumer confidence and potential impacts from tariffs, could curb discretionary spending in the mid-to-lower income brackets, affecting the earnings of brands like Olive Garden and LongHorn, which are sensitive to economic downturns.
A substantial portion of Darden's commodity costs is domestic, but any unforeseen disruptions in supply chain dynamics could affect food costs, leading to volatile net margins.
High margin levels at Olive Garden are above historical expectations, which may not be sustainable if management opts to invest more aggressively in marketing and operational improvements to maintain growth, potentially impacting net earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $233.286 for Darden Restaurants based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $255.0, and the most bearish reporting a price target of just $157.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $14.3 billion, earnings will come to $1.4 billion, and it would be trading on a PE ratio of 24.5x, assuming you use a discount rate of 9.3%.
Given the current share price of $211.85, the analyst price target of $233.29 is 9.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Share Price Weakness And Menu Focus Will Define Restaurant Sector Momentum