Piper Upgrades Darden, Likes Current Restaurant Operating Model

Piper Jaffray has upgraded Darden Restaurants, Inc. DRI to Overweight from Neutral and raised the price target to $78 from $67 as it is now confident in the restaurant's operating model.

"We are now confident in this restaurant operating model given the fully formed management team and expect consistency in leadership to drive sustainable outperformance of the Darden brands," analyst Nicole Miller Regan wrote in a note.
The analyst attributed the restaurant's recent operating momentum to the consistent strategy and focus of the now fully formed management team.

"At a high-level, we reiterate our sense that industry sentiment is muted, while the consumer backdrop is debated to range from volatile to "relatively" stable," Regan noted.

Amid intense restaurant promotions, Regan says Darden's strategy on everyday value and customization continues to perform relatively well.

A key catalyst for Darden remains the "ability to leverage scale, data analytics and strategic planning at the corporate level within each concept, as well as harness the results-oriented culture."

The analyst's five-year model calls for $6.00 of earnings power in the 2021 period. For the current fourth quarter, Regan sees same-store sales of +2.4 percent at Olive Garden and LongHorn versus +2.5 percent consensus.

Shares of Darden Restaurants were up 1.72 percent to $64.37. The price target of $78 implies an upside of 15 percent from Monday's closing price of $63.28.