UBS upgrades Darden, sees hope for restaurants

AP News
Posted: Dec 16, 2009 4:50 PM

Shares of restaurant owner Darden Restaurants Inc., which operates Olive Garden, Red Lobster and Longhorn Steakhouse, climbed Wednesday after an analyst upgraded the stock.

In a research note published Wednesday, UBS analyst David Palmer boosted his rating to "Buy" from "Neutral," saying the stock was a better value and the restaurant industry's sales began improving in November.

Palmer said stock prices for Darden are at "compelling levels" and that the restaurant company's fiscal third-quarter results should be "particularly strong."

Orlando-based Darden reports its second quarter results Thursday. Analysts surveyed by Thomson Reuters expect the company to earn 42 cents per share on revenue of $1.65 billion. During the same period last year, Darden earned 43 cents per share on sales of $1.67 billion.

Palmer called the second quarter a "worry quarter," thanks in part to a shift that put the Thanksgiving holiday in the three-month period.

"The good news is that industry trends have stabilized in the last five to six weeks _ something that could prove heartening to Darden and its investors," Palmer wrote.

Darden, which also owns Capital Grille, Bahama Breeze and Seasons 52, has weathered the economic downturn better than competitors that slashed menu prices to lure customers, which in turn hurt their sales and profits.

Darden shares climbed 80 cents, or 2.5 percent, to $33.36 in trading Wednesday. They had reached $33.91 earlier in the session.