Darden Restaurants, Inc. (NYSE: DRI)

Darden Restaurants, Inc. (NYSE: DRI) is a restaurant company, with a wide footprint across 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 increased by 1.35% CAGR in the last five fiscal years.

Among its full-service restaurants, Olive Garden and LongHorn Steakhouse are very 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 increased 27.3% in the past five years. However, the stock has fallen nearly 20% in the last year. It looks that the price weakness has created an opportunity to increase holdings in DRI stock.

Hedge fund holdings in DRI increased by 69.7 thousand shares in the last quarter. Also, the corporate insiders purchased $248.3 thousand worth of DRI shares in the last three months.

Also, the Street is optimistic about Darden and has a Strong Buy consensus rating based on 18 Buys and five Holds. DRI’s average price forecast of $140.86 reflects 22.38% upside from the current level.

A brief discussion provided below might be helpful in understanding why the market and the analyst community are interested in this $15.2-billion restaurant company.

Competitive Edge

Darden’s large-scale operations and expertise give it an upper hand over its peers. Its revenues of $9,630 million in the twelve months ended May 29, 2022, are way higher than the $4,275 million of its nearest competitor.

Also, Darden’s lower support costs and higher profitability raise its investment appeal. Its general & administrative expenses represent 3.9% of annual sales versus 5.4% for the peer group, and its profitability is 12.1% versus 6.3% for the competitors.

Rewards for Shareholders

The company is committed to returning values to its shareholders. It paid dividends totaling $563 million and repurchased shares worth approximately $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 nullifies any pending program of the company. Also, the company got approvals for a 10% hike in dividend rate, which now stands at $1.21 per share.

Growth Prospects & Projections

Darden leverages an experienced team and focuses on providing the best services, good food and drinks, and a welcoming atmosphere to its customers. The company also focuses on innovation in food offerings and using technologies to ease its operations. Effective management of rising costs and expenses is a priority for the company. It expects total inflation to be 6% in Fiscal 2023 (ending May 2023).

In June, the company’s President & CEO, Rick Cardenas, opined that the company was focusing on “driving profitable sales, investing in the guest experience and simplifying operations” in Fiscal 2023.

Darden forecasts revenues of $10.2-$10.4 billion and earnings of $7.40-$8 per share in Fiscal 2023. These projections are higher than $9.63 billion of revenues and $7.39 of earnings per share recorded in Fiscal 2022. It also intends to add 55 to 60 new restaurants to its portfolio.

Wall Street’s Take

Five days ago, Nick Setyan of Wedbush 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 prospects attractive but believes that DRI is exposed to near- and medium-term uncertainties.

Another analyst, Christopher Carril of RBC Capital has maintained a Buy rating on DRI while decreasing the price target to $143 (24.24% upside potential) from $151.

The footfall on the company’s websites grew 28.34% year-over-year in May and 45.76% year-to-date, compared to the same period last year. The increased website traffic activity hints at the company’s solid growth prospects.

Conclusion

Despite cost-related headwinds, Darden’s food and service offerings, competitive advantages, and sound capital allocation policies enhance its investment appeal. It could prove to be an ideal choice for long-term investors and medium-term risk-takers.

NYSE: DRI ) è un’azienda di ristoranti con un’ampia presenza negli Stati Uniti e in Canada. Possedeva e gestiva 1.867 ristoranti a servizio completo alla fine del Fiscal 2022 (terminato il 29 maggio 2022). Il numero dei suoi ristoranti è aumentato dell’1,35% CAGR negli ultimi cinque anni fiscali.

Tra i suoi ristoranti a servizio completo, Olive Garden e LongHorn Steakhouse sono molto popolari. Le altre famose catene di ristoranti dell’azienda sono Cheddar’s Scratch Kitchen, Seasons 52, Yard House e Bahama Breeze.

Le azioni di Darden sono aumentate del 27,3% negli ultimi cinque anni. Tuttavia, il titolo è sceso di quasi il 20% nell’ultimo anno. Sembra che la debolezza dei prezzi abbia creato un’opportunità per aumentare le partecipazioni in azioni DRI.

Le partecipazioni di hedge fund in DRI sono aumentate di 69,7 mila azioni nell’ultimo trimestre . Inoltre, gli insider aziendali hanno acquistato azioni DRI per un valore di 248,3 mila dollari negli ultimi tre mesi .

Inoltre, lo Street è ottimista su Darden e ha un rating di consenso Strong Buy basato su 18 Buy e cinque Hold. La previsione del prezzo medio di DRI di $ 140,86 riflette un rialzo del 22,38% rispetto al livello attuale.

Una breve discussione fornita di seguito potrebbe essere utile per capire perché il mercato e la comunità di analisti sono interessati a questa società di ristoranti da 15,2 miliardi di dollari.

Vantaggio competitivo

Darden’s large-scale operations and expertise give it an upper hand over its peers. Its revenues of $9,630 million in the twelve months ended May 29, 2022, are way higher than the $4,275 million of its nearest competitor.

Also, Darden’s lower support costs and higher profitability raise its investment appeal. Its general & administrative expenses represent 3.9% of annual sales versus 5.4% for the peer group, and its profitability is 12.1% versus 6.3% for the competitors.

Rewards for Shareholders

The company is committed to returning values to its shareholders. It paid dividends totaling $563 million and repurchased shares worth approximately $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 nullifies any pending program of the company. Also, the company got approvals for a 10% hike in dividend rate, which now stands at $1.21 per share.

Growth Prospects & Projections

Darden leverages an experienced team and focuses on providing the best services, good food and drinks, and a welcoming atmosphere to its customers. The company also focuses on innovation in food offerings and using technologies to ease its operations. Effective management of rising costs and expenses is a priority for the company. It expects total inflation to be 6% in Fiscal 2023 (ending May 2023).

A giugno, il Presidente e CEO dell’azienda, Rick Cardenas, ha affermato che l’azienda si stava concentrando sul “promuovere vendite redditizie, investire nell’esperienza degli ospiti e semplificare le operazioni” in Fiscal 2023.

Darden prevede un fatturato di $ 10,2-$ 10,4 miliardi e un utile di $ 7,40- $ 8 per azione nel Fiscal 2023. Queste proiezioni sono superiori a $ 9,63 miliardi di ricavi e $ 7,39 di utili per azione registrati nel Fiscal 2022. Intende inoltre aggiungere da 55 a 60 nuovi ristoranti al suo portafoglio.

La presa di Wall Street

Cinque giorni fa, Nick Setyan di Wedbush ha ribadito un rating Hold su DRI abbassando l’obiettivo di prezzo a $ 122 (potenziale di rialzo del 5,99%) da $ 140. L’analista trova interessanti le prospettive a lungo termine della società, ma ritiene che DRI sia esposto a incertezze a breve e medio termine.

Un altro analista, Christopher Carril di RBC Capital , ha mantenuto un rating Buy su DRI riducendo l’obiettivo di prezzo a $ 143 (potenziale di rialzo del 24,24%) da $ 151.

Il traffico sui siti web dell’azienda è cresciuto del 28,34% anno su anno a maggio e del 45,76% da inizio anno , rispetto allo stesso periodo dell’anno scorso. L’aumento dell’attività di traffico del sito Web suggerisce solide prospettive di crescita dell’azienda.

Conclusione

Nonostante i venti contrari legati ai costi, le offerte di cibo e servizi, i vantaggi competitivi e le solide politiche di allocazione del capitale di Darden ne aumentano l’attrattiva per gli investimenti. Potrebbe rivelarsi una scelta ideale per gli investitori a lungo termine e per coloro che assumono rischi a medio termine.