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BMO Capital Downgraded Darden Restaurants

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BMO’s recommendations

On September 24, BMO Capital downgraded Darden Restaurants (DRI) from “market perform” to “underperform” due to concerns about food commodity deflation.

As reported by MarketWatch, Andrew Strelzik of BMO Capital expects the SSSG (same-store sales growth) to deaccelerate across the casual dining industry from the beginning of fourth quarter due to the widening gap between consumers eating food at home and eating out. The gap is a result of food commodity deflation. Strelzik also lowered his target price for Darden from $105 to $96. The new price target represents a potential decline of 15.2% from the current stock price of $113.28.

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Other analysts’ recommendations

Of the 25 analysts that follow Darden, 56% favor a “buy” as of September 24, 40% favor a “hold,” and 4.0% favor a “sell.” On the same day, analysts set an average target price of $123.86, which represents a return potential of 9.3%.

Since the announcement of Darden’s earnings for the first quarter of 2019 on September 20, Canaccord Genuity, Stifel, Jefferies, and Maxim raised their target prices. The strong first-quarter earnings and higher 2019 guidance by management appear to have compelled analysts to raise their target prices.

Peer comparisons

Of the 20 analysts that follow Texas Roadhouse (TXRH), 25.0% rated it as a “buy,” 65.0% rated it as a “hold,” and 10.0% rated it as a “sell.” On average, analysts have set a target price of $66.67 on Texas Roadhouse stock, which represents a potential fall of 2.6% from the current price of $68.47.

Of the 13 analysts that follow Bloomin’ Brands (BLMN), 30.8% rated it as a “buy,” 61.5% rated it as a “hold,” and 7.7% rated it as a “sell.” On average, analysts have set a target price of $22.56 on the stock, which represents a potential return of 22.6% from its current price of $19.91.

Of the 19 analysts that follow Brinker International (EAT), 15.8% rated it as a “buy,” 68.4% rated it as a “hold,” and 15.8% rated it as a “sell.” Analysts have set an average target price of $46.44 on the stock, which represents a potential fall of 2.1% from its current price of $47.42.

Next, we’ll discuss Darden’s stock performance.

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