DRI Stock Slides on Q1 Miss, Creating a Bullish Entry Point
Darden Restaurants Today
As of 03:59 PM Eastern
- 52-Week Range
- $155.18
▼
$228.27
- Dividend Yield
- 3.25%
- P/E Ratio
- 20.81
- Price Target
- $224.21
The only thing wrong with Darden Restaurants’ NYSE: DRI Q1 earnings report is that it wasn’t better than expected. Other than that single flaw, all other details are bullish and affirm an outlook for rising share prices.
The takeaway is that the 10% share price reduction is a knee-jerk reaction to the news and an otherwise opportunistic entry point for quick investors. Based on the results, the cash flow, capital returns, and analysts’ sentiment, this restaurant stock’s discount won’t last long and the rebound could be robust.
The initial analysts’ response is favorable. MarketBeat tracked two revisions within an hour or so of the release, with both reiterating their previous ratings and targets. Those align with the trend, which includes increased coverage, firm sentiment, a bullish bias to the Moderate Buy rating, and an uptrend in the consensus price target.
The consensus price target is significant. It forecasts a 20% upside after the release-induced sell-off, and the high-end range adds 10%.
Likewise, the robust institutional trends are unlikely to be altered due to the news, only strengthened because of the discounted share price.
They include a 90% ownership rate, and the group has bought on balance every quarter this year. The support they provide is ample, given the high ownership rate and buying trends, which netted more than 6.7% of the market cap on a year-to-date basis.
Growing Darden Restaurants Pays You to Own It
Darden Restaurants Dividend Payments
- Dividend Yield
- 3.22%
- Annual Dividend
- $6.00
- Dividend Increase Track Record
- 4 Years
- Dividend Payout Ratio
- 67.57%
- Next Dividend Payment
- Nov. 3
Despite falling short of the analysts’ consensus for revenue and earnings, Darden had a solid quarter. The critical takeaways are that revenue grew by 8.7% under the influence of acquisitions, an increase in organic store count, and positive comps, and the earnings are sufficient for reinvestment, capital returns, and maintaining balance sheet health.
The company’s primary franchises underpinned revenue growth. Olive Garden comps grew by 5.9% and Longhorn by 5.5%, offset by slightly negative results in the fine dining segment.
The takeaway is that the diversified model pays off as consumers shift away from more expensive options.
The margin news is equally good despite the adjusted earnings falling slightly short of the consensus estimate. The net result is $1.97 in adjusted earnings, up an accelerated 12.5% compared to the slower top-line growth.
Equally important, the company updated its guidance to align with the consensus forecast, a forecast sufficient to sustain a higher share price before the release and one that can help lift it back to those highs.
The capital return is significant, including the dividend and share repurchases. The dividend yields approximately 3.15%, with the stock currently discounted to around $190. Meanwhile, buybacks further enhance shareholder returns through financial leverage.
The FQ1 activity helped to reduce the count by an average of 1.3% for the quarter and is expected to continue at a similar pace for the foreseeable future. The current authorization is sufficient for four to five more quarters, and nothing in the results or balance sheet suggests it won’t be renewed when it runs out.
Darden Restaurants Pulls Back: Could Fall Further
Darden’s price action isn’t pretty. The 10% pullback confirms resistance at the all-time highs that will cap gains until later in the year or in 2026. Until then, there is a risk of a deeper pullback, but a hard floor is in sight.
That is near $175, aligning with previous highs and critical moving averages likely to provide support. A move below that level would signal a significant change in the outlook, but it is unexpected now. The likely scenario is that support will confirm at or above $175 and a rebound will begin to form soon after.
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