What Analysts Recommend for DRI ahead of Its Fiscal 1Q17 Earnings



Analysts’ recommendations

As of September 27, 2016, Darden Restaurants (DRI) was trading at $61.5. This price may already have priced in the estimates we’ve discussed in this series.

Now, let’s look at analysts’ recommendations and estimated price targets for Darden over the next 12 months.

The lowering of Darden’s same-store sales growth for fiscal 2017 could have compelled analysts to lower their consensus price target to $69.3 from $71.2, which was estimated before the company’s fiscal 4Q16 earnings. The new estimate represents a return potential of 12.7%.

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Christopher O’Cull of KeyBanc Capital Markets, who is more optimistic about the stock, expects its share price to reach $80 in the next 12 months, which represents a return potential of 30.1%. On the lower end of things, Paul L. Westra of Stifel expects DRI’s price to fall 13.8% to touch $53 in the next 12 months.

The return potentials of Darden’s peers over the next 12 months are as follows:

  • Texas Roadhouse (TXRH): price target of $45.4 with return potential of 10.7%
  • Bloomin’ Brands (BLMN): price target of $21.2 with return potential of 19.6%
  • Brinker International (EAT): price target of $53.2 with return potential of 1.7%

Analysts’ recommendations

According to a Bloomberg consensus, of the 31 analysts surveyed, 41.9% have “buy” recommendations on Darden, 48.4% have “hold” recommendations, and 9.7% have “sell” recommendations. As analysts raise their target prices for the stock for the next 12 months, the stock’s price may also rise, and vice versa. Notably, Darden forms 0.26% of the holdings of the iShares Russell Mid-Cap Growth ETF (IWP).

A stock’s having a lower price than its target price doesn’t mean it’s an automatic “buy.” Before investing, you should carefully analyze the various metrics we’ve covered in this series.


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