Mizuho Securities has moved Darden Restaurants' rating from Neutral to Outperform, accompanied by a hike in the price target from $195 to $235. This adjustment reflects the firm's optimistic view on same-store sales growth and anticipated margin enhancement.
Analysts at Mizuho foresee casual dining outperforming the market in 2026, considering Darden a key beneficiary of both general industry momentum and factors unique to the company. For the fiscal third quarter, Olive Garden's same-store sales are now projected to increase by 5%, surpassing the consensus estimate of 4.5%. The forecast for LongHorn Steakhouse remains steady at a 7% increase, also above consensus expectations.
Looking further, Mizuho has adjusted upward its same-store sales forecasts for Olive Garden in fiscal years 2026 and 2027, while maintaining its above-consensus estimates for LongHorn. Key contributors to this optimistic outlook include higher tax refunds, which alone could boost same-store sales by approximately 1.3% in both brands. Additionally, factors such as easier year-over-year comparisons, growth in delivery services, enhanced marketing efforts, menu innovation, and moderate pricing increases support this growth prospect.
The brokerage also revised its restaurant-level margin projections, anticipating improvement in fiscal 2027 as inflationary pressures on labor and commodities moderate compared to fiscal 2026. Furthermore, accelerating menu pricing is expected to bolster margins. Revised margin estimates stand at 20.2% for fiscal 2026 and 20.5% for 2027, comparing favorably with consensus estimates of 20.3% and 20.2%, respectively.
Unit growth is expected to accelerate to over 3%, compared with a recent pace of less than 2.5%, thereby underpinning higher long-term EBITDA and earnings progression. Mizuho projects net unit growth will approach the midpoint of Darden’s long-term target range of 3% to 4%, supported by robust cash returns.
Correspondingly, earnings per share estimates for fiscal years 2026 and 2027 have been increased to $10.78 and $11.89 from previous forecasts of $10.55 and $11.49. The updated price target is derived using a 12.8x enterprise value to calendar 2026 EBITDA multiple, representing a premium versus peers, justified by the company’s anticipated margin stability and accelerated EBITDA growth.