Darden Restaurants (DRI) is expected to see an improving earnings trajectory as trends at its Olive Garden brand accelerate from a first-quarter low point, Oppenheimer said in a Tuesday note.
The brokerage raised its earnings-per-share estimates for the restaurant operator to $11.27 and $12.45 for fiscal 2027 and 2028, respectively, from $11.24 and $12.38.
"We expect a simple reiteration of full-year guidance, but our work suggests post-(first-quarter) earnings dynamics creates a more attractive path for (2027) EPS (versus) consensus for rest of year," Oppenheimer analysts Brian Bittner and Michael Tamas said in the note.
Darden in June guided fiscal 2027 EPS at $11.10 to $11.35. Currently, markets are looking for non-GAAP EPS of $11.29 for the ongoing year, according to a FactSet survey.
Ahead of Darden's first-quarter results due on Sept. 24, Oppenheimer expects the company to report EPS of $2.03, compared with the Street's $2.05 estimate. It projects consolidated same-store sales growth of 2.8%, below the consensus view that calls for a 3.1% increase.
The brokerage projects Olive Garden's first-quarter same-store sales rising 0.9%. That would fall short of the Street's 1.8% estimate, but Oppenheimer sees the period as a low point for the brand.
Olive Garden's underlying trends should accelerate from here on out due to factors including easier comparisons and healthy industry dynamics, the analysts said.
"Buy-side expects a slight (first-quarter Olive Garden same-store sales) miss partially offset by solid comps across Longhorn and other segments," Bittner and Tamas wrote. "We think (first-quarter) earnings could remove an overhang with potential for better (Olive Garden) trends, healthier margins, and stronger EPS growth for rest of (fiscal 2027)."
Shares of Darden were down 3.6% in Tuesday trading, but the stock has risen nearly 15% so far this year.
Oppenheimer raised its price target on Darden to $245 from $235 and maintained an outperform rating.
On Monday, Morgan Stanley said Darden's first-quarter same-store sales and EPS will likely beat market estimates, though Olive Garden may miss consensus. Last week, UBS Securities said Darden will likely reiterate its full-year outlook after reporting strong fiscal first-quarter results, despite softening trends at Olive Garden.
In August, Brinker International (EAT) issued an upbeat fiscal 2027 financial guidance at the midpoint, confident that its Chili's brand will sustain the growth momentum that drove strong fourth-quarter results. Restaurant Brands International (QSR) reported better-than-expected second-quarter earnings amid strong comparable sales growth at Burger King across domestic and international markets.
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