Oppenheimer Maintains Outperform Rating On Darden Ahead Of Q4 Results

As Darden Restaurants Inc. DRI is slated to release its fourth quarter results on June 30, Oppenheimer maintained its Outperform rating and $70 price target on shares. The brokerage sees limited risks for fiscal year 2017 earnings and above average free cash flow.

Analysts believe Darden was forced to perform in the weak trend that the industry had to face in two years. However, the analysts see same-store sales to come "above the industry" level. These analysts are also cautious especially sales and earnings results.

Investors would also be keen watching as to what the guidance for the year 2017 would be. The brokerage thinks based on 1-3 percent long-term same-store sales outlook growth, the analysts expects EPS to be $3.89-4.10 range, while the Street's current estimation called for EPS of $3.99. This accounted for 11-17 percent YoY growth. That means it would be more than 8-12 percent long-term guidance due to savings from costs of 5-7 percent, which would be partly compensated by real-estate spin and slower unit growth of 2 percent.

"Industry sales sluggishness causes us to approach DRI with caution into F17 relative to our more bullish stance over the past 18 months. We still see limited risk to F17 estimates and remain attracted to the model's FCF (6.1% yield) and OG's ability to continue to outperform the industry," the analysts said in a research note.