Credit Suisse Downgrades Darden Restaurants (DRI) to Neutral
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Credit Suisse downgraded Darden Restaurants (NYSE: DRI) from Outperform to Neutral with a price target of $72.00 (from $69.00), noting the stock has seen a ~2pt. P/E re-rate post-election and had already traded at a premium to low-growth casual dining peers.
Analyst Jason West commented, "DRI now trades at ~18x NTM P/E, up from ~15-16x several weeks ago. ~10% upside to today’s price would imply a P/E of ~20x, a threshold which DRI has rarely crossed in its ~20-year life as a public company. Conversely, ~10% downside implies a P/E of ~16x, still ~5-10% above DRI’s long-term average P/E of ~15x. DRI has also made significant progress in improving the earnings power of the business in recent years, via SSS re-acceleration and cost-cutting. However, this leaves limited room for further upside surprise in our view. DRI’s unit growth story is also limited by a relatively saturated core brand (Olive Garden) and no material international presence."
Shares of Darden Restaurants closed at $73.93 yesterday.
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