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Investors May be Getting Hungry for Darden Restaurants

DRI ran up after breaking from cup-and-handle, but has since pulled back on profit-taking


Darden Restaurants (NYSE:DRI) — This company owns and operates almost 2,000 restaurants in the United States and Canada, including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille and Bahama Breeze.

Recently, S&P raised DRI to a “buy” from “hold,” noting that it was selling at just 12.2 times its fiscal year (FY) 2014 (ended May 31) earnings estimate, which is below the industry average of 18.5 times. They estimate earnings of $3.85 for FY 2013, and analysts’ estimates for FY 2014 are for $4.39. S&P’s price target is $62.

On Sept. 13, with the stock trading at $54.58, the Trade of the Day recommended it saying, “Technically DRI broke from a 14-month cup-and-handle formation… which was helped by a breakaway gap. The price target is $64.”

The stock ran to a high of $57.93 on Sept. 21, and fell on profit-taking, closing on Wednesday at $54.68. Our price target remains at $64, and the stock it is a strong buy.

Trade of the Day – Darden Restaurants (NYSE:DRI)
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Trade of the Day Chart Key

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