Darden Restaurants, Inc. (NYSE: DRI) is a restaurant company with a large presence in the United States and Canada. It owned and operated 1,867 full-service restaurants at the end of fiscal 2022 (ended May 29, 2022). Its restaurant count has grown 1.35% CAGR over the past five years.
Among its full-service restaurants, Olive Garden and LongHorn Steakhouse are popular. The company’s other well-known restaurant chains are Cheddar’s Scratch Kitchen, Seasons 52, Yard House and Bahama Breeze.
Shares of Darden have risen 27.3% over the past five years. However, the stock has fallen nearly 20% in the past year. It appears that the price weakness has created an opportunity to increase DRI stock holdings.
According to TipRanks, hedge fund holdings in DRI increased by 69,700 shares in the last quarter. Additionally, insiders have purchased $248.3 thousand worth of DRI stock over the past three months.
In addition, Rue is bullish on Darden and has a Strong Buy consensus rating based on 18 buys and five takes. DRI’s average price prediction of $140.86 reflects a 22.38% upside from the current level.
A brief discussion below might be helpful in understanding why the market and analyst community are interested in this $15.2 billion restaurant business.
Darden’s large-scale operations and expertise give it an edge over its peers. Its revenue of $9,630 million in the twelve months ended May 29, 2022 is well above the $4,275 million of its nearest competitor.
Additionally, Darden’s lower support costs and higher profitability increase its investment appeal. Its general and administrative expenses represent 3.9% of annual sales against 5.4% for the peer group, and its profitability is 12.1% against 6.3% for competitors.
The company undertakes to return values to its shareholders. It paid dividends totaling $563 million and repurchased shares worth about $1.1 billion in fiscal 2022.
In June 2022, the company’s board of directors approved a $1 billion share buyback program. This new authorization cancels any current program of the company. Additionally, the company won approvals for a 10% increase in the dividend rate, which now stands at $1.21 per share.
Growth outlook and projections
Darden relies on an experienced team and focuses on providing the best services, great food and drink and a welcoming atmosphere to its customers. The company also focuses on innovation in food offerings and the use of technology to facilitate its operations. Effectively managing rising costs and expenses is a business priority. He expects headline inflation to be 6% in fiscal year 2023 (ending May 2023).
In June, the company’s president and CEO, Rick Cardenas, said the company was focused on “driving profitable sales, investing in customer experience and simplifying operations” over the course of the year. fiscal year 2023.
Darden projects revenue of $10.2 billion to $10.4 billion and earnings of $7.40 to $8 per share in fiscal 2023. These projections are above $9.63 billion in revenue and $7.39 in earnings per share recorded in fiscal 2022. He also plans to add 55-60 new restaurants. to his wallet.
The Taking of Wall Street
Five days ago, Wedbush’s Nick Setyan reiterated a Hold rating on DRI while lowering the price target to $122 (5.99% upside potential) from $140. The analyst finds the company’s long-term outlook attractive but believes that DRI is exposed to short- and medium-term uncertainties.
Another analyst, Christopher Carril of RBC Capital, maintained a Buy rating on DRI while lowering the price target to $143 (24.24% upside potential) from $151.
TipRanks Website Traffic tool reveals that traffic to the company’s websites increased 28.34% year-over-year in May and 45.76% year-to-date, compared at the same time last year. The increased activity on the website hints at the company’s strong growth prospects.
Despite cost headwinds, Darden’s catering and service offerings, competitive advantages and strong capital allocation policies enhance its investment appeal. It could prove to be an ideal choice for long-term investors and medium-term risk takers.
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