RBC Capital Raises Price Target on Darden Restaurants (DRI) Based on Fundamentals and Likely Value From REIT

RBC Capital reiterates a Sector Perform rating on Darden Restaurants (NYSE: DRI), and raised the price target to $74.00 (from $70.00), to reflect improved fundamentals and likely value from the separation of the company's real estate portfolio into a REIT. Analyst David Palmer believes that McDonald’s and Restaurant Brands International clearly have the scale to create a REIT.

Palmer commented, "We are raising our price target from $70 to $74 and our FY16 EPS estimate from $2.90 to $3.16 (+19% YOY). Our new price target reflects both our higher EPS estimates and the value likely to be created from the separation of the company’s real estate portfolio into a REIT. While our earnings model does not account for the financial impact from the REIT transaction on the new Darden (likely to be ~$50M annual hit to pre-tax profit), our FY16 EPS estimate implies slightly higher sales growth estimates and margin expansion from easing food costs."

For an analyst ratings summary and ratings history on Darden Restaurants click here. For more ratings news on Darden Restaurants click here.

Shares of Darden Restaurants closed at $69.39 yesterday.

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