Darden Restaurants Has the Growth and Cash Flow to Hit New Highs

Key Points

• Darden’s Q3 fiscal year 2026 results showed steady sales and comparable-sales growth, alongside an EPS beat on an adjusted basis.
• The company kept returning capital through dividends and buybacks, with repurchases continuing to reduce share count.
• Bahama Breeze-related charges weighed on reported results, but updated full-year guidance points to continued momentum into 2026.

Darden Restaurants NYSE: DRI stock price could reach a new high this year because it's growing, generating cash flow, and returning capital to its investors, who are accumulating shares. That setup was reinforced in the company’s Q3 fiscal year 2026 (FY2026) earnings report, which included solid revenue growth, resilient comps, and an improved full-year outlook. The critical takeaway for 2026 is that all factors point to higher share prices, not just its quality, suggesting a new high is a minimum target. In this scenario, analysts' trends remain bullish, and institutions continue to accumulate as the company performs, drives cash flow, pays dividends, and buys back shares.

The capital return is substantial. At recent prices, the stock yields about 2.94%, and the distribution growth has been aggressive. Buybacks are equally attractive. The Q3 activity resulted in a 1.86% decline for the quarter and 1.5% average for the year, with the pace expected to continue in Q4 and in the subsequent fiscal year. There is sufficient capital remaining under the existing authorization for five or six quarters at the FY2026 pace, and an additional authorization is likely. 

Darden’s Quality Shines Through Impairments and One-Offs 

Darden Restaurants had a good Q3 despite accounting for one-offs and impairments related to Bahama Breeze. The impairments are the result of review and turnaround efforts, which, regrettably, mean the end of the brand. However, the company’s other brands, including Olive Garden, LongHorn Steakhouse, and its Other establishments, continue to grow. The Bahama Breeze locations will mostly be converted to other restaurant formats.

The net result is $3.35 billion in revenue, up 5.9% compared to last year and slightly better than expected. Strength was most evident at Long Horn, which grew comps by 7.2%, and in the Other category, which grew by 3.9%. Systemwide, comps in ongoing business were up a stronger-than-expected 4.2%, driven by a higher store count. Store count increased by 31 or 1.4%. 

Margin news is a mixed bag. The GAAP results appeared weaker than expected, but they reflected one-time items tied to the Bahama Breeze review and restaurant closures. On an adjusted basis, results were notably stronger and more in line with what investors were looking for, and the comparisons should get cleaner as those items roll off.

Guidance is another strength. Management lifted its full-year outlook for revenue and earnings, with full-year targets now modestly above consensus. The company expects about 9.5% topline growth for the year, including roughly 2% from the extra fiscal week, and adjusted EPS of $10.57 to $10.67, with the low end in line with consensus.

Bullish Revisions Keep the Darden Restaurants Outlook Intact

The analysts’ response to Darden’s results and guidance update is cautiously optimistic, aligning with the trend. MarketBeat tracked no revisions immediately after the release, but several commentaries were reported, focusing on growth, Bahama Breeze, and operational headwinds, including bad weather.

The company estimated a 100 bps impairment related to Winter Storm Fern, enough to have moved the needle. As it is, the group of 19 MarketBeat tracks rates the stock as a Moderate Buy with a 68% Buy-side bias, the consensus price target forecasts an 11% upside, and the revision trend is bullish, pointing to the $260 range and fresh all-time highs. 

While analysts are leading the market higher, institutions are limiting the downside. The data shows this group owning nearly 90% of the stock, accumulating at a two-to-one pace on a trailing-twelve-month basis, and ramping their buying in Q1 2026. This provides a solid support base, suggesting price action is unlikely to retreat below the 150-day exponential moving average (EMA)  and will trigger a buying signal if it does. 

Darden’s price action slipped following the release, opening slightly below the 150-day EMA and triggering a bullish response. The market advanced from the early low, confirming support at the critical level, setting the market up to continue advancing as the year progresses. Resistance targets near $210, $220, and $227 may induce volatility but are not expected to cap gains in the long term. The critical level is at $220; a move above it clears the baseline of a head-and-shoulders pattern, opening the door to a sustainable rally.