Skip to Content

Darden Restaurants Inc DRI

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Darden Posts Robust Q1 Results, but Its Lofty Share Price Offers Less Value Than Its Restaurants

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Narrow-moat Darden Restaurants reported strong fiscal first-quarter results, with system sales of $2.3 billion nearly 12% higher than prepandemic figures, implying just shy of 4% annualized growth. The firm defrayed input cost inflation via sales leverage and operational efficiencies, generating consolidated restaurant margins of 20.9%, nearly 3 percentage points better than two-year-ago figures (18.1%). Much of this we expect Darden to maintain, as our normalized forecast anticipates 19.8% margins, 180 basis points higher than the five-year historical average). While we have raised our fair value estimate to $128 per share from $124 as a result of lower near-term marketing expenditures and time value of money, the shares look expensive, trading at a 20%-25% premium to our fair value estimate after a 5.5% runup after the earnings release.

Read Full Analysis

Company Profile

Business Description

Darden Restaurants is the largest restaurant operator in the U.S. casual and fine dining markets, with consolidated revenue of $7.2 billion in fiscal 2021 resulting in 3.8% market share (per Euromonitor data and our calculations). The company maintains a portfolio of eight restaurant chains: Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Eddie V’s, and Bahama Breeze. Darden generates revenue almost exclusively from company-owned restaurants, though a network of 64 franchised restaurants and consumer-packaged goods sales through the traditional grocery channel contribute modestly. As of Aug. 31, the company owned 1,838 restaurants in the U.S.

Contact
1000 Darden Center Drive
Orlando, FL, 32837
T +1 407 245-4000
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Aug 31, 2021
Fiscal Year End May 31, 2021
Stock Type Cyclical
Employees 156,883

Related