Darden Restaurants, the parent company of Olive Garden and other casual dining chains, is likely to reaffirm its long-term earnings targets when it reports fiscal first-quarter results on Sept. 24, according to a note from Oppenheimer. The investment bank's analysts expect the company to stick with its fiscal 2027 adjusted earnings per share guidance of $11.10 to $11.35, even if the upcoming quarter looks a bit softer than Wall Street anticipated.
Shares of Darden slipped about 3% on Tuesday, reflecting some investor caution ahead of the report. But Oppenheimer believes the dip may be overdone, pointing to easing beef inflation as a potential offset to softer sales at Olive Garden, the company's largest brand.
What the numbers say
Oppenheimer's analysts note that Darden has reiterated its fiscal 2027 guidance after first-quarter results in each of the past four years, and they expect a repeat this time. The company's target of $11.10 to $11.35 in adjusted earnings per share for fiscal 2027 is roughly in line with Oppenheimer's own estimate of $11.27.
For the near term, the firm models a slightly weaker quarter: adjusted earnings per share of $2.03 versus the consensus expectation of $2.05. Same-store sales—a key retail metric that tracks revenue at locations open at least a year—are projected to rise 2.8%.
Adjusted earnings per share is a measure that strips out one-time items like restructuring costs or asset impairments, giving investors a clearer view of ongoing profitability.
Why beef prices matter
Beef is a major cost input for Darden, particularly for its steak-heavy brands like LongHorn Steakhouse and Ruth's Chris. When beef prices rise, margins get squeezed; when they fall, the company can either pocket the savings or reinvest in promotions and value deals to attract diners.
Oppenheimer's view is that easing beef inflation will help cushion any softness in Olive Garden's same-store sales. Olive Garden, known for its unlimited breadsticks and pasta, has faced tougher comparisons and shifting consumer behavior in recent quarters, but the cost relief could keep overall profitability on track.
For everyday investors, this is a reminder that restaurant stocks are sensitive to commodity prices. A dip in beef costs can be a tailwind for margins, even when sales growth is modest.
What it means for investors
For shareholders, the key takeaway is that Darden's management appears committed to its long-term targets, which could provide some reassurance after Tuesday's share decline. The stock's drop suggests some investors were worried about a possible guidance cut, but Oppenheimer's analysis suggests that risk is low.
Investors should watch the Sept. 24 report for two things: first, whether Darden indeed reiterates its fiscal 2027 outlook, and second, how management frames the first-quarter softness. If the company points to temporary factors like weather or timing, that could be seen as a positive signal. If it cites broader consumer weakness, that might raise concerns about the casual dining sector as a whole.
It's also worth noting that Darden's ability to hold its 2027 targets comes amid a broader environment where many consumer-facing companies are grappling with inflation and shifting spending patterns. The company's scale and diversified portfolio—which includes brands like Cheddar's Scratch Kitchen and Yard House—may give it more flexibility than smaller rivals.
Oppenheimer's confidence is not a guarantee, but it does suggest that the market's initial reaction on Tuesday may have been overly pessimistic. As always, investors should consider their own time horizon and risk tolerance before making any decisions based on a single analyst's view.
For more on how companies are navigating cost pressures and long-term targets, see our coverage of NRW's recent contract wins and Cooper Companies' earnings beat.
