Jefferies Initiates Coverage of Darden Restaurants With Buy

Jefferies has initiated coverage of Darden Restaurants DRI with a Buy rating and a $52 price target. Jefferies believes Darden is attractively valued and has the potential to see multiple expansion as the company demonstrates EPS visibility during FY11. Darden should be able to see improved investor perceptions aided by its solid cost outlook, financial engineering levers, and mid-teens EPS growth. Jefferies believes the casual dining sector remains a market share game and Darden appears poised to continue to gain share through brand strength, operations and marketing in this tepid economic recovery. Darden should be able to drive positive same-store sales in FY2011. All major brands have traffic-driving initiatives under way, although risks remain in the currently soft pace of the recovery in casual dining driven by external factors and the relative discounting and its intensity in casual dining. Risks to achieving the target price include potential for negative same-store sales given the challenged economic recovery, and the inability to realize expected margin improvements and new unit returns. Darden Restaurants is trading less than 1% lower on the day. Learn how to find the best stocks to trade each day in our 70 page E-Book and 90 minute online video for free.