UBS Reiterates Buy on Darden Restaurants Ahead of Earnings

Core Viewpoint - UBS maintains a Buy rating and a price target of $230 for Darden Restaurants ahead of its fiscal Q3 2026 earnings release, expecting solid same-store sales momentum despite weather disruptions [1] Group 1: Sales Performance - Investor expectations indicate that Olive Garden's same-store sales may slightly underperform the consensus forecast of 4.4%, while LongHorn Steakhouse is expected to modestly exceed the consensus estimate of 5.7% [2] - The company forecasts blended same-store sales growth of 3.5% to 4.3% and anticipates new restaurant openings between 65 and 70 locations [4] Group 2: Financial Guidance - Many investors expect management to either reaffirm its fiscal 2026 outlook or narrow the guidance range due to macroeconomic and weather-related pressures, with current guidance suggesting total sales growth of 8.5% to 9.3% [3] - Adjusted earnings per share are projected to be between $10.50 and $10.70, which includes approximately $0.20 from an extra week [4] Group 3: Market Sentiment and Valuation - Investor sentiment appears cautious due to concerns about fourth-quarter comparisons and potential cost pressures from elevated beef prices, but UBS believes Darden's underlying performance will remain resilient through fiscal 2026 [5] - At approximately 17 times consensus fiscal 2027 earnings, Darden shares are viewed as attractive for a high-quality restaurant operator with strong revenue stability and margin protection capabilities despite inflationary pressures [6]