Darden Restaurants Q4 Results Top Estimates; Boosts Dividend 7.1%

Darden Restaurants (DRI) reported Q4 earnings of $2.58 per share, up slightly from $2.57 last year, with adjusted EPS of $2.98 beating estimates of $2.97; revenue grew 10.6% to $3.27 billion, also exceeding expectations. Same-restaurant sales increased 4.6%, driven by Olive Garden and LongHorn Steakhouse, and the company issued FY2026 EPS guidance of $10.50-$10.70, slightly below the street's $10.75 estimate, while also raising its sales growth outlook; the board authorized a $1 billion share repurchase program and a 7.1% dividend increase, sending shares up over 3% in pre-market trading.

Analysis

Darden Restaurants reported robust fourth-quarter results, with adjusted earnings per share of $2.98, surpassing analyst expectations of $2.97 and marking a significant increase from $2.65 in the prior-year quarter. This performance was underpinned by a 10.6% year-over-year rise in total sales to $3.27 billion, which also exceeded revenue forecasts of $3.26 billion. The sales growth was primarily driven by a blended same-restaurant sales increase of 4.6%, contributions from the recent acquisition of 103 Chuy's Tex Mex restaurants, and the opening of 25 net new restaurants. Key segments Olive Garden and LongHorn Steakhouse delivered strong same-restaurant sales growth of 6.9% and 6.7% respectively, though the Fine Dining segment experienced a 3.3% decline in same-restaurant sales. Signaling confidence and a commitment to shareholder returns, Darden's Board of Directors approved a 7.1% increase in the quarterly cash dividend to $1.50 per share and authorized a new $1 billion share repurchase program. Despite the strong quarterly performance and these positive shareholder initiatives, which contributed to a 3.66% pre-market share price increase, the company's newly initiated fiscal 2026 guidance projects net earnings per share between $10.50 and $10.70 and total sales growth of 7% to 8%. This guidance for both earnings (midpoint $10.60 vs. $10.75 street) and sales growth (7-8% vs. 8.94% street) falls slightly below current analyst consensus estimates.

Key Decisions for Investors

• Investors should acknowledge Darden's strong Q4 earnings and revenue beat, driven by healthy same-restaurant sales in its core casual dining brands, but weigh this against the fiscal 2026 guidance which, while newly initiated, is slightly more conservative than current street expectations for both EPS and sales growth.
• The 7.1% increase in the quarterly dividend and the authorization of a new $1 billion share repurchase program are positive capital return initiatives that signal management's confidence and could provide valuation support for the stock.
• It is advisable to monitor the performance trajectory of the Fine Dining segment for signs of improvement, the integration and contribution of the newly acquired Chuy's restaurants, and the broader consumer spending environment, as these will be critical factors for achieving the guided 2.0% to 3.5% same-restaurant sales growth in fiscal 2026.