Street Analysts Mixed After Darden Restaurants Serves Up Lukewarm Results

"A continued commitment to leverage the organization's scale and drive value at the brand-level remain significant advantages for Darden," the analyst wrote.

Heading into Darden's print the stock's multiple was trading at a premium to its peers and nothing has changed to alter the thesis, KeyBanc Capital Markets analyst Eric Gonzalez wrote in a note.

The valuation is justified as Olive Garden and LongHorn are "sustainable growth stories" and Cheddar's outlook remains favorable.

Darden's stock is trading at 18 times 2020 estimated EPS which is a premium to the peer average of 17.5 times but warranted given its scale, management team, same-store sales growth consistency, among other factors.

Planning The Next Meal

Darden's management kept its fiscal 2020 guidance unchanged, including expectations for comps to grow 1% to 2% and EPS to be $6.30-$6.45, BTIG analyst Peter Saleh wrote in a note. Comps should benefit 80 to 100 basis points from the timing of Thanksgiving but the impact from Hurricane Dorian should erase 20 to 30 basis points of those gains.

"We still view Darden favorably given the strength of its core concepts, balance of sales drivers and highly enviable margin performance," Saleh wrote. "These factors should continue to drive shares higher despite the elevated industry headwinds."

Darden's report showed continued strength at large brands but smaller brands disappointed, Raymond James analyst Brian Vaccaro wrote in a note.

Even though Olive Garden and LongHorn combine for 72% of total sales the weakness at smaller brands makes the case for outperformance versus management's guidance more difficult.

Finally, Darden's management estimated food cost inflation to be 1% to 2% in fiscal 2020 and labor inflation to be 3.5% to 4.5%, SunTrust Robinson Humphrey analyst Jake Bartlett wrote in a note. These figures look "manageable" due to the company's productivity improvements.

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