Bernstein Sees Limited Upside; Evercore ISI Remains Bullish

Darden Restaurants has received mixed reactions from analysts recently. Evercore ISI has upgraded the stock, while Bernstein has adopted a more cautious approach.

Evercore ISI raised Darden’s rating to Outperform from In Line and increased the price target from $165 to $205. This upgrade reflects their enhanced confidence in sales growth, particularly at Olive Garden, which contributes to 45% of the company’s overall sales. The firm pointed to various initiatives, including targeted price-point advertising, limited-time offers (LTOs), and the integration of Uber Eats as crucial factors driving performance.

They expressed optimism, stating, “We believe the company will continue to focus on profitable sales growth, allowing EBITDA margin to improve over the next 12 months,” and have adjusted their fiscal year 2026 same-store sales growth estimate from 1.5% to 3%. Additionally, they are positive about Long Horn Steakhouse, which accounts for 25% of sales, noting its ongoing market share gains.

On the other hand, Bernstein downgraded Darden to Market-Perform from Outperform, citing limited growth potential and ongoing macroeconomic pressures that could impact consumer spending. They reported a 2.9% decline in Olive Garden’s same-store sales during the first quarter of fiscal year 2025, representing the chain’s most significant decline in over ten years, excluding pandemic-related disruptions.

Bernstein acknowledged management’s shift toward a more aggressive strategy, including LTOs and price-point advertising, but voiced concerns about longer-term challenges. They suggested, “These attempts may be masking more enduring pressures than we had anticipated.” Furthermore, they noted that due to the low frequency of visits in Darden’s segments, it may take time for consumers to notice these changes.

The firm also raised alarms about potential labor inflation and the effects of stricter immigration controls, which could reduce the available labor pool. Despite these worries, Bernstein believes Darden will still meet its fiscal year 2025 earnings per share growth guidance of 6-8%. However, they lowered their price target from $190 to $180, reflecting a balanced assessment of risk and reward following the recent stock rally.