Argus upgrades Darden Restaurants (NYSE:DRI) to a Buy rating from Hold and assigns a price target of $115.
“We think that Darden turned the corner in 1Q21 with a more moderate decline in comp sales (down 29% after a sharper drop of 48% in 4Q20) and well-above-consensus EPS. Management expects further progress in the second quarter, with the comp decline moderating to 18%, EBITDA of $200-$215 million, and EPS of $0.65-$0.75. We think this guidance is achievable as the company has now reopened more than 90% of its restaurant dining rooms (albeit at limited capacity), and continues to benefit from efforts to expand takeout and delivery orders and simplify its menu.”
The firm also expects Darden to continue its record of positive earnings surprises over the past six quarters.
The long-term rating on Darden also remains at Buy on conviction that share buybacks, unit expansion and further cost reductions will lead to EPS growth over time.
Shares of Darden are up 1.90% in premarket action to $102.50.