Darden Restaurants Cooked Up an 18% Gain With Sizzling 2025 Guidance

Shares of Darden Restaurants (DRI -0.57%) soared to a new all-time high on Thursday morning following the release of robust second-quarter results. The restaurant operator's stock peaked at an overnight gain of 18.1% before backing down to a 15.5% uptick at 1:30 p.m. ET.

Darden's Q2 by the numbers

The company behind restaurant chains such as Olive Garden, Cheddar's Scratch Kitchen, and Bahama Breeze reported results right in line with Wall Street's expectations. Sales rose 6% year over year to $2.9 billion, driven by solid same-store growth in the central brands of Longhorn Steakhouse and Olive Garden. Comparable fine dining revenues slipped 5.8% lower as consumers backed away from pricey dinners in this challenging economy.

On the bottom line, adjusted earnings per share (EPS) rose 10% to $2.03. Darden faced rising labor costs but balanced out that pressure with effective price negotiations for key ingredients.

The recent acquisition of Tex-Mex fast-casual chain Chuy's made a small contribution to Darden's revenues. The deal closed about midway through the second quarter.

Looking ahead, Darden set up a revenue target of roughly $12.1 billion in fiscal year 2025. Inspired by a smooth integration of Chuy's 103 locations, this guidance point stands 1.2% above the current analyst consensus.

The company dispelled some investor worries

Darden is one of the largest names in the American restaurant sector, and its profit margins are consistently wider than those seen in large rivals with similar fast-casual restaurant concepts. It's no surprise to see a strong fall-quarter performance from this sector leader, but investors had been bracing for something worse. Darden fell short of analyst expectations in the previous quarter, after all, and nobody knew what to make of the Chuy's integration process.

But the numbers were good, management described a smooth Chuy's takeover, and the next year should be more lucrative than 2024. Darden Restaurants' stock is reasonably priced and today's breakout from nine months of market doldrums seems appropriate.