Darden Restaurants, Inc. (DRI) shares took a hit Friday after the Olive Garden and LongHorn Steakhouse parent delivered quarterly earnings that came up just short of Wall Street's expectations.
The company reported second-quarter adjusted earnings per share of $2.08 on Thursday, missing the analyst consensus estimate of $2.10. It's a small miss, but enough to send shares down in Friday trading.
During the earnings call, executives touched on some interesting shifts in consumer behavior. Management said they're keeping close tabs on GLP-1 drug usage, particularly how it might be affecting alcohol consumption. To counter potential headwinds, the company has rolled out lighter-portion menu options that appear to be resonating with diners.
BTIG Sees Strong Setup Ahead
Analyst Peter Saleh from BTIG reiterated his Buy rating with a $225 price target, saying Darden's guidance looks quite achievable. He pointed to a favorable setup where beef costs are peaking, labor pressures are finally easing, and management can lean modestly on pricing without spooking customers.
Saleh noted that sales momentum remains robust, even if earnings are lagging for the moment. He expects profitability to inflect higher going forward, supported by a menu strategy that aligns well with what consumers actually want. That positioning could drive multi-year sales growth.
On the GLP-1 question, Saleh said the impact on Darden has been limited so far. His survey data suggests many GLP-1 users are lower-income consumers who are cutting back sharply on restaurant visits, but they're primarily reducing quick-service dining rather than casual dining. Still, these trends could pressure industry same-store sales by roughly 0.5 to 1 percentage point.
Looking ahead, Saleh expects beef costs to climb at a low-teens pace, which may force additional pricing actions in the second half. He highlighted that some of the same-store sales improvement stems from higher pricing at LongHorn Steakhouse. Meanwhile, falling retail steak demand could eventually ease beef prices despite tight supply conditions.
Stephens Takes a Balanced View
Analyst Jim Salera from Stephens maintained his Equal-Weight rating with a $205 price target, noting that consumer signals look uneven. Casual dining overall is posting modest comps despite slightly negative traffic, but Darden continues outperforming the category on both sales growth and traffic trends.
Salera emphasized that diners are seeking value and experience, reflected in strong satisfaction scores across Darden's key brands. He highlighted strong engagement with abundance and affordability platforms at Olive Garden, along with everyday value messaging at LongHorn Steakhouse. At the fine dining brands, clear and bundled pricing helps customers plan special-occasion spending.
Darden's scale gives it an advantage, supporting pricing that runs below inflation over time. The lighter portions menu at Olive Garden, Salera noted, aims to protect affordability perceptions without sacrificing the brand's core appeal.
The analyst said the fiscal 2026 adjusted EPS forecast stays unchanged, while the EBITDA outlook edges slightly higher. The fiscal 2027 adjusted EPS estimate also remains unchanged.
Price Action: Darden Restaurants shares were trading lower by 2.48% to $187.98 at last check Friday.