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Can Darden Outperform in Fiscal 4Q17?

PART:
1 2 3 4 5 6
Part 6
Can Darden Outperform in Fiscal 4Q17? PART 6 OF 6

Darden on the Street: Why Analysts Are Favoring ‘Hold’ Recommendations

Target price

As of June 21, 2017, Darden Restaurants (DRI) stock was trading at $88.28. The stock price might have already factored in the various estimates that we’ve been discussing in this series. In this final part of the series, we’ll look at analysts’ target prices and recommendations.

Darden on the Street: Why Analysts Are Favoring &#8216;Hold&#8217; Recommendations

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Darden’s strong fiscal 3Q17 earnings and the management’s raised 2017 earnings guidance may have compelled analysts to raise their target prices. As of June 21, 2017, analysts were expecting Darden’s stock price to reach $86.86 over the next 12 months, which implies a fall of 1.6% from its current level. Before its fiscal 1Q17 earnings, analysts had forecast a price target of $77.73.

The target prices and return potentials of Darden’s peers are as follows:

  • Texas Roadhouse (TXRH): $50.76, implying a return potential of 5.7%
  • Bloomin’ Brands (BLMN): $22.08, implying a return potential of 8.8%
  • Brinker International (EAT): $46.43, implying a return potential of 25.7%

Recommendations

Of the 26 analysts following Darden, 30.8% are recommending a “buy,” while 65.4% are recommending “hold,” and 3.8% are recommending “sell.” On June 19, 2017, Robert W. Baird raised its target price for Darden from $85 to $90 but made no changes to its “neutral” rating.

Remember, if analysts raise their target prices, the company’s stock tends to rise. But a target price lower than the current stock price does not mean an automatic “sell.” Investors have to analyze the various parameters we’ve discussed in this series before making investment decisions.

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