Shares of multi-brand restaurant operator Darden Restaurants, Inc. (DRI) recorded a new yearly high of $164.28 after the company delivered stellar fiscal first-quarter 2022 results. Shares ended the day up 6.1% at $159.50 on September 23.
The company reported earnings of $1.76 per share in Q1, significantly better than analysts’ estimates of $1.65 per share. In the prior-year quarter, Darden reported earnings of $0.28 per share. (See Darden Restaurants stock charts on TipRanks)
To add to that, total sales jumped 51% compared to the year-ago period to $2.31 billion and surpassed the Street’s estimate of $2.24 billion. Robust sales growth was driven by a same-restaurant sales increase of 47.5% and 34 net new restaurant openings.
Commenting on the quarterly results, Gene Lee, Chairman and CEO of Darden said, “Regardless of the operating environment, our unwavering commitment to our strategy ensures we stay focused on what we do best: providing exceptional guest experiences.”
Additionally, the company’s Board declared a quarterly cash dividend of $1.10 per common share, payable on November 1, 2021, to shareholders of record as of October 8, 2021.
Furthermore, the Board increased its share buyback program by $750 million, bringing the total repurchase authorization to $1 billion.
Based on its current view of the business and expected future performance, the company raised its Fiscal 2022 outlook. Darden now expects FY22 total sales to fall in the range of $9.4 – $9.6 billion compared to the consensus estimate of $9.41 billion.
Also, FY22 earnings are forecasted to be in the range of $7.25 – $7.60 per share, compared to the consensus forecast of $7.43 per share.
In response to Darden’s financial performance, Stifel Nicolaus analyst Christopher O’Cull raised the price target on the stock to $165 (3.5% upside potential) from $155 while maintaining a Hold rating.
O’Cull said, “We anticipate the company will continue to strengthen its value proposition through menu quality investments and light-handed pricing actions until management is confident it has better visibility into the steady-state operating environment.”
Furthermore, the analyst believes that Darden’s management team is one of the strongest in the industry and has confidence in the company’s long-term competitive position. However, the analyst does caution that sales may not meaningfully outpace the Street’s estimate, resulting in shares being range-bound as expectations are adjusted upwards.
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 11 Buys and 6 Holds. The average Darden Restaurants price target of $163.73 implies 2.7% upside potential to current levels. Shares have gained 63.9% over the past year.
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