Evercore ISI reiterates Darden stock rating, sees growth from Olive Garden

Evercore ISI reiterated an Outperform rating and $250 price target on Darden Restaurants (DRI), citing strong growth potential for its Olive Garden and LongHorn Steakhouse brands, which are projected to achieve over 4% same-store sales growth in FY26, significantly outpacing the casual dining industry. This follows Darden's recent robust Q4 FY25 results, which exceeded revenue and EPS expectations, prompting KeyBanc to also raise its price target to $245. Despite Evercore ISI slightly reducing FY26/27 EPS estimates due to strategic reinvestments in affordability and labor, their forecasts remain above consensus, supporting the maintained price target and reflecting expectations for sustained mid-single-digit company-wide sales growth and plans for 60-65 new restaurant openings in FY26.

Analysis

Darden Restaurants (DRI) has received strong endorsements from Evercore ISI and KeyBanc, who reiterated and raised their price targets, respectively, following robust fourth-quarter fiscal 2025 results that surpassed analyst expectations. The company reported EPS of $2.98 on revenue of $3.3 billion, beating forecasts of $2.94 and $3.26 billion. The core of the bullish thesis rests on the sustained outperformance of its key brands, Olive Garden and LongHorn Steakhouse, which are projected to achieve over 4% same-store sales growth in fiscal 2026, significantly outpacing a casual dining sector expected to be flat. This performance is underpinned by strategic reinvestments in affordability and labor, which, while causing a slight 1-2% reduction in Evercore's EPS estimates and a lower EBIT expansion forecast of 35 basis points, are expected to drive mid-single-digit sales growth. Despite these costs, Darden's own guidance for fiscal 2026 projects 7-8% total sales growth and a diluted EPS of $10.50-$10.70, supported by the planned opening of 60-65 new restaurants. However, investors should note the stock's 52% rally over the past year has pushed it near its 52-week high, with technical indicators suggesting an overbought condition and a valuation at the high end of its historical range.

Key Decisions for Investors

• Given the strong fundamental performance and analyst confidence, long-term investors could view the stock's 'overbought' status as a potential entry point during any price consolidation or pullback.
• Investors should closely monitor same-store sales growth for Olive Garden and LongHorn Steakhouse, as continued outperformance against the industry is critical to justifying the premium valuation and achieving the company's fiscal 2026 guidance.
• It is prudent to weigh the positive growth outlook against the stock's current valuation, which at ~21 times fiscal 2027 estimated earnings is at the top of its five-year historical range, potentially limiting near-term upside potential.