Darden Restaurants stock price target lowered to $245 at Evercore ISI

Evercore ISI lowered its price target on Darden Restaurants (DRI) to $245 from $250, citing higher food cost inflation that prompted a slight reduction in its FY26 EPS forecast to $10.71. Despite this, the firm maintained an Outperform rating, projecting over 15% upside based on expected strong same-store sales growth at Olive Garden and LongHorn Steakhouse, with the revised EPS still exceeding consensus. This adjustment follows DRI's recent Q4 earnings beat but conservative FY26 outlook, leading to mixed but generally cautious optimism among analysts, including Truist Securities which maintains a Buy rating.

Analysis

Despite Evercore ISI reducing its price target on Darden Restaurants (DRI) to $245 from $250, the firm maintained an Outperform rating, signaling confidence in the company's operational strength amidst macroeconomic headwinds. The price target adjustment is a direct response to higher food cost inflation, particularly in beef, which prompted a minor reduction in the FY26 EPS forecast to $10.71. Notably, this revised estimate still surpasses the consensus of $10.68 and falls within Darden's own conservative guidance. The bullish thesis remains anchored on expectations of over 4% same-store sales growth at core brands Olive Garden and LongHorn Steakhouse, which together account for 70% of sales. This optimism is supported by Darden's recent Q4 performance, where it narrowly beat analyst expectations with revenue of $3.272 billion and adjusted EPS of $2.98. However, the company's high P/E ratio of 23.64, conservative forward guidance, and the mixed but cautiously optimistic sentiment from other analysts—ranging from Truist's Buy rating to Melius's Hold—underscore a balanced risk-reward profile. Darden's proactive strategies, such as reinvesting in affordability and menu innovation, alongside its strong financial health and 31-year record of dividend payments, are key factors offsetting the margin pressures.

Key Decisions for Investors

• Investors should weigh Darden's proven operational execution and strong same-store sales outlook against persistent margin pressure from food cost inflation and the company's own conservative guidance.
• Given the stock's relatively high valuation with a P/E of 23.64, it is crucial to monitor the success of menu innovation and pricing strategies in sustaining customer traffic, especially as key brand Olive Garden faces more difficult year-over-year comparisons.
• For income-focused investors, Darden's 31-year history of consistent dividend payments and a current yield of 2.83% provide a compelling argument for holding the stock, reflecting strong financial health and a commitment to capital returns.