Darden Restaurants Target Raised by RBC

Darden Restaurants received a price-target increase Wednesday from RBC Capital Markets after the firm updated its model on the restaurant company to reflect the addition of Cheddar’s Scratch Kitchen. The new price target is $96 per share, up from $86. The boost brings the price target above the stock’s Tuesday closing price of $92.69 from below it. RBC kept its investment rating on the stock at sector perform.

In a note to clients, RBC said it raised its earnings estimates and price target on Darden “to reflect the continued outperformance of Darden’s core brands and [earnings-per-share] accretion from the Cheddar’s acquisition,” which closed in late April. The firm said it believes Cheddar’s will bolster Darden’s long-term growth by 1 to 2 percentage points, bringing it to about 10% long term. “Cheddar’s widespread appeal seems to be partly driven by its varied menu, high quality ingredients and prep methods, and attractive entry price points,” RBC said. “Given the similar target demographic of Olive Garden, we believe Cheddar’s may similarly benefit from Darden’s expertise serving that customer segment,” the firm added.