Core Insights - The restaurant industry has faced significant challenges over the past year due to rapid changes in consumer preferences and increased operating costs [1] Industry Summary - The broad basket of restaurant stocks has struggled, indicating a tough market environment for the sector [1]

Company Overview - Darden Restaurants, Inc. (NYSE:DRI) is a full-service restaurant firm that has faced challenges in 2025, with its shares remaining flat year to date [2]. Financial Performance - The company reported $3.04 billion in revenue for its fiscal first quarter, meeting analyst estimates, but its adjusted EPS of $1.97 fell short of the $2 estimate [2]. - For the second fiscal quarter, Darden's EPS of $2.08 also missed analyst expectations of $2.10 [2]. Market Reactions - Following the first quarter earnings report, Darden's stock experienced a 7.7% decline in September [2]. - Stephens reduced the share price target for Darden from $215 to $205 while maintaining an Equal Weight rating due to softness in its Olive Garden restaurants [2]. - BTIG reiterated a Buy rating with a price target of $225 for Darden [2]. Strategic Insights - CEO Rick Cardenas noted an increase in visits from higher-income customers, indicating a potential shift in the customer base [2]. - Jim Cramer highlighted that Darden's performance was positively influenced by its chicken menu offerings, which are in large supply [3].

Summary of Conference Call Notes Industry Overview - The macroeconomic environment is favorable for the stock market in 2026, with global economic growth projected at 2.8%, higher than the market expectation of 2.5% [2][4] - The U.S. economy is expected to grow by 2.6%, benefiting from reduced tariff barriers, tax cuts, and a loose monetary environment [4] - The impact of artificial intelligence (AI) on GDP growth has not been included in these predictions [4] Key Financial Projections - S&P 500 earnings per share (EPS) are forecasted to grow by 12% in 2026, reaching $305, with revenue growth of 7% and a profit margin increase of 70 basis points [6][8] - In 2027, EPS is expected to grow by an additional 10%, reaching $336 [6][8] - The largest seven stocks in the S&P 500 are projected to contribute 46% of the index's EPS growth by 2026 [12] Sector Insights - Cyclical sectors are expected to see accelerated earnings growth, with consumer and non-residential construction stocks underperforming relative to economic growth expectations [17][21] - AI-driven productivity improvements are a focal point, with predictions that AI will contribute to a 0.4% increase in S&P 500 EPS by 2026 and 1.5% by 2027 [15][27] Investment Themes and Stock Recommendations - Focus on companies that have adopted AI to enhance productivity, with a specific index (GSXUPROD) tracking non-tech companies integrating AI into their operations [26] - Recommended stocks include: - **RBLX**: Target price of $180, with a potential upside of 122% [45] - **GEV**: Target price of $840, with a potential upside of 37% [46] - **HOOD**: Target price of $167, with a potential upside of 42% [46] - **AVGO**: Target price of $450, with a potential upside of 30% [46] - **SNPS**: Target price of $600, with a potential upside of 25% [46] - **Uber**: Target price of $126, with a potential upside of 58% [47] - **DKS**: Target price of $285, with a potential upside of 36% [47] - **DRI**: Target price of $225, with a potential upside of 20% [48] Economic Concerns - The "K-shaped economy" persists, with low-income groups facing significant inflationary pressures while high-income groups experience wealth growth [32][33] - The labor market is expected to remain stagnant, impacting consumer spending, particularly among low-income households [33] Conclusion - The overall outlook for 2026 is optimistic, with strong economic growth anticipated, particularly in the U.S. However, challenges remain for low-income consumers and certain sectors that have not fully capitalized on economic recovery [4][12][33]

Financial Performance - Total sales increased by 7.3% to $3.10 billion for the second quarter of fiscal 2026, and by 8.9% to $6.15 billion for the first six months, compared to $2.89 billion and $5.65 billion for the same periods in fiscal 2025[106] - Net earnings from continuing operations were $237.4 million for the second quarter and $495.3 million for the first six months of fiscal 2026, up from $215.7 million and $423.3 million in the same periods of fiscal 2025[106] - Diluted net earnings per share from continuing operations were $2.03 for the second quarter and $4.23 for the first six months of fiscal 2026, compared to $1.82 and $3.57 for the same periods in fiscal 2025[106] Sales Growth Expectations - The company expects sales growth for fiscal 2026 to be between 8.5% and 9.3%, with same-restaurant sales growth projected between 3.5% and 4.3%[107] Restaurant Operations - The company-owned restaurant count increased to 2,182 as of November 23, 2025, from 2,159 at the end of fiscal 2025, reflecting the addition of 103 Chuy's locations[102] - Olive Garden's sales increased by 5.4% to $1.36 billion for the second quarter, driven by a 1.7% increase in same-restaurant guest counts and a 3.0% increase in average check[110] - LongHorn Steakhouse's sales rose by 9.3% to $775.9 million for the second quarter, supported by a 3.8% increase in same-restaurant guest counts[111] - Fine Dining segment sales increased by 3.3% to $316.2 million for the second quarter, primarily due to revenue from new restaurants[112] - Other Business segment sales grew by 11.3% to $647.3 million for the second quarter, largely driven by the addition of Chuy's[113] Capital Expenditures - Capital expenditures for new restaurant openings and technology initiatives are expected to be between $750 million and $775 million for fiscal 2026[107] - Capital expenditures increased to $375.0 million for the first six months of fiscal 2026, up from $314.5 million in the same period of fiscal 2025, reflecting increased spending on new restaurant construction and remodels[138] Cost Management - Food and beverage costs as a percentage of sales increased to 31.1% for the three months ended November 23, 2025, compared to 30.2% for the same period in 2024[117] - Restaurant labor costs as a percentage of sales rose to 32.2% for the three months ended November 23, 2025, from 32.1% in the prior year[117] - General and administrative expenses decreased to 3.8% of sales for the three months ended November 23, 2025, down from 5.0% in the same period of 2024[117] Tax and Discontinued Operations - The effective income tax rate for continuing operations increased to 12.8% for the three months ended November 23, 2025, compared to 12.3% for the same period in 2024[119] - The company reported losses from discontinued operations of $0.2 million for the second quarter of fiscal 2026, down from $0.6 million in the same quarter of fiscal 2025[121] Profit Margins - Olive Garden's segment profit margin increased to 21.8% for the three months ended November 23, 2025, compared to 21.5% in the prior year[124] Credit and Financing - The company entered into a $1.25 billion Revolving Credit Agreement on October 23, 2023, with no outstanding balances as of November 23, 2025[129] - As of November 23, 2025, the company had $812 million of credit available under the Revolving Credit Agreement after considering commercial paper and letters of credit[129] - The company targets an investment-grade bond rating, with current ratings of "Baa2" from Moody's and "BBB" from both Standard & Poor's and Fitch[128] Cash Flow - Net cash flows provided by operating activities from continuing operations increased to $663.2 million for the first six months of fiscal 2026, compared to $661.8 million for the same period in fiscal 2025[136] - Net cash flows used in investing activities from continuing operations were $363.9 million for the first six months of fiscal 2026, a significant decrease from $939.3 million in the first six months of fiscal 2025[138] - Net cash flows used in financing activities from continuing operations were $314.9 million for the first six months of fiscal 2026, compared to net cash provided by financing activities of $298.9 million for the same period in fiscal 2025[139] Share Repurchase - The company authorized a new share repurchase program allowing for the repurchase of up to $1 billion of outstanding common stock, with 2 million shares repurchased in the first six months of fiscal 2026[141] Current Assets and Liabilities - Current assets totaled $1.04 billion as of November 23, 2025, an increase from $937.7 million as of May 25, 2025, primarily due to higher prepaid income taxes and inventories[143] - Current liabilities increased to $2.65 billion as of November 23, 2025, from $2.25 billion as of May 25, 2025, driven by an increase in short-term debt[144] Future Earnings Risks - The potential losses in future net earnings from changes in equity forwards and commodity instruments were approximately $65.2 million over a one-year period as of November 23, 2025[150] - The fair value of long-term fixed-rate debt outstanding averaged $2.18 billion, with a high of $2.20 billion and a low of $2.14 billion during the six months of fiscal 2026[150]

Core Viewpoint - As interest rates decline heading into 2026, investors may shift their focus from fixed-income instruments to attractive dividend stocks, with analysts' stock selection aiding in making informed choices [1] Group 1: Chevron (CVX.US) - Chevron returned $6 billion to shareholders in Q3 through $3.4 billion in dividends and $2.6 billion in stock buybacks, offering a quarterly dividend of $1.71 per share, equating to an annualized dividend of $6.84 and a yield of approximately 4.5% [2] - Piper Sandler analyst Ryan Todd reaffirmed a "Buy" rating on Chevron with a target price of $178, noting the company's solid position despite unfavorable oil conditions and positive refining business performance [2] - Todd highlighted that Chevron's capital efficiency is underestimated, with upstream capital expenditures per barrel of oil equivalent (boe) being 29% lower than the industry average, and he expects a conservative annual free cash flow growth of 10% [2][3] Group 2: Darden Restaurants (DRI.US) - Darden Restaurants announced a quarterly dividend of $1.50 per share, payable on February 2, 2026, resulting in an annualized dividend of $6 per share and a yield of 3.2% [4] - BTIG analyst Peter Saleh maintained a "Buy" rating on Darden with a target price of $225, citing a mixed but mostly positive quarterly report driven by improved customer traffic in major brands and same-store sales exceeding expectations [4] - Saleh noted that high beef prices remain a challenge affecting restaurant profit margins and earnings per share (EPS), but he is optimistic about Darden meeting its performance guidance due to stabilizing beef costs and easing labor cost pressures [4][5] Group 3: Ares Capital (ARCC.US) - Ares Capital announced a dividend of $0.48 per share, to be paid on December 30, 2025, leading to an annualized dividend of $1.92 per share and a yield of 9.5% [6] - RBC Capital analyst Kenneth Lee identified Ares Capital as a favored BDC stock for 2026, reaffirming a "Buy" rating with a target price of $23, despite a less optimistic outlook for the BDC sector due to potential declines in net interest income (NII) and return on equity (ROE) [7] - Lee emphasized Ares Capital's leadership position in the BDC market, substantial scale, and strong asset issuance capabilities of its direct lending platform, supporting a positive view on the sustainability of its dividend [7]

Group 1: Chevron (CVX) - Chevron returned $6 billion to shareholders in Q3, comprising $3.4 billion in dividends and $2.6 billion in share repurchases, with a quarterly dividend of $1.71 per share, yielding approximately 4.5% [3] - Piper Sandler analyst Ryan Todd reiterated a buy rating on Chevron with a price target of $178, while TipRanks' AI Analyst has an "outperform" rating and a price target of $164, indicating confidence in the company's solid position despite challenges [4] - Todd highlighted Chevron's capital efficiency, noting its upstream capital expenditure per barrel of oil equivalent is 29% below the peer average, and projected a conservative annual growth outlook of 10% for free cash flow [5] Group 2: Darden Restaurants (DRI) - Darden announced a quarterly dividend of $1.50 per share, with an annualized dividend of $6 per share, yielding 3.2% [8] - BTIG analyst Peter Saleh maintained a buy rating on Darden with a price target of $225, while TipRanks' AI Analyst has a price target of $218, reflecting optimism despite mixed results in Q2 [9] - Saleh noted that Darden's strategy of under-pricing inflation and focusing on delivery has driven strong sales momentum, although high beef prices have impacted margins [11] Group 3: Ares Capital (ARCC) - Ares Capital announced a dividend of 48 cents per share, with an annualized dividend of $1.92, yielding 9.5% [14] - RBC Capital analyst Kenneth Lee reaffirmed a buy rating on Ares Capital with a price target of $23, while TipRanks' AI Analyst has an "outperform" rating with a price target of $24, indicating strong confidence in the company [15] - Lee emphasized Ares Capital's dominant market position and strong earnings support for dividends, despite a potential decline in net interest income and return on equity in the BDC space [17]

Core Insights - The article highlights the expertise of a seasoned equity analyst specializing in the U.S. restaurant industry, covering various segments from quick-service to fine dining [1] - The analyst employs advanced financial modeling and sector-specific KPIs to identify hidden value in public equities, particularly focusing on micro and small-cap companies often overlooked by mainstream analysts [1] Industry Focus - The research firm, Goulart's Restaurant Stocks, is dedicated to the U.S. restaurant sector, which includes quick-service, fast casual, fine dining, and niche concepts [1] - The analyst also covers related sectors such as consumer discretionary, food & beverage, and casinos & gaming, indicating a broad understanding of the consumer market [1] Research Methodology - The analyst utilizes advanced financial modeling and strategic insights to conduct thematic research and valuation efforts [1] - A focus on sector-specific KPIs allows for a more nuanced understanding of the restaurant industry's dynamics and potential investment opportunities [1] Background and Expertise - The analyst possesses a strong academic foundation with an MBA in Controllership and Accounting Forensics, along with a Bachelor's in Business Administration [1] - Specialized training in valuation, financial modeling, and restaurant operations enhances the analyst's ability to provide in-depth insights into the industry [1]

Core Thesis - Darden Restaurants (NYSE: DRI) stock shows potential for a trend-following entry after a significant pullback in 2025, with a credible path to market-beating returns in 2026 if resistance is cleared [1] Price Action and Trends - DRI stock has been in an uptrend since 2014, with the only significant disruption being the volatility caused by COVID-19 [2] - Recent activity indicates a strong uptrend in 2024, breaking out of an Ascending Triangle Pattern and reaching a new all-time high, driven by growth, margin strength, and capital returns [3] - The stock experienced a 25% decline from its peak to the November 2025 low, but the long-term uptrend remains intact [4] Technical Indicators - The recent pullback allowed momentum indicators like MACD and stochastic to reset, indicating potential for further upward movement [5] - The 150-week EMA, a critical long-term support indicator, is advancing and aligns with the DRI uptrend, setting the stage for a rebound [5] - Technical indicators suggest a trend-following entry, with bullish crossovers in stochastic and MACD indicating an uptrending market that could retest current highs in 2026 [7] Key Resistance Levels - The stock must reclaim the 150-day EMA to confirm accumulation, as many investors view this line as a proxy for intermediate-term accumulation [8] - A successful push above the 150-day EMA, followed by a retest, would provide confirmation for traders seeking more than an initial bounce [9] Earnings Performance - Darden's fiscal Q2 results showed over 7% year-over-year growth, substantial margins, and healthy cash flow, including a 3.1% yielding dividend and share buybacks [10] - The FQ2 release led to price target increases and upgrades, affirming a Moderate Buy rating with a 20% upside forecast, driven by aggressive institutional buying [11] - Institutions own over 90% of the stock, with a notable purchasing activity of $2 for every $1 sold in 2025, indicating limited downside and ample upside potential for DRI [12]

Summary of U.S. Consumer Strategy & Quantitative Research Webinar Industry Overview - The focus is on the U.S. Consumer sector, specifically Consumer Discretionary and Consumer Staples, which have underperformed the market by low double-digit percentages year-to-date in 2025 [3][18]. Core Insights and Arguments - **Market Performance**: 2025 has been challenging for the Consumer sector, with both Discretionary and Staples underperforming. Consumer Staples are now seen as attractive due to favorable price-to-forward earnings valuation multiples [3][31]. - **Sector Dynamics**: There is a contrasting performance between Consumer Staples and technology sectors, raising concerns about a potential tech bubble. Economic factors such as cutbacks in healthcare and SNAP benefits for low-income consumers, alongside inflation, could lead to an economic slowdown [4][19]. - **Investment Recommendations**: Focus on Consumer stocks that are: 1. More international 2. Exposed to higher-income consumers 3. Defensive in nature 4. Not facing idiosyncratic pressures that are not fully priced in [3][22]. - **Key Themes**: Tariff volatility, GLP-1 drug uptake, and consumer bifurcation are critical themes to monitor. Lower-income households are pressured by cutbacks, while higher-income households may benefit from upcoming tax breaks [5][20]. Subsector Recommendations - **Consumer Staples**: Emphasis on companies with international exposure in Soft Beverages and Household & Personal Care, as well as defensive Broadline Retailers. Caution is advised around companies negatively impacted by GLP-1 drug uptake [6][22]. - **Consumer Discretionary**: Focus on higher-quality names with reliable earnings performance. Caution is advised for those without a quality bias, although companies catering to higher-income consumers may benefit from tax breaks in 2026 [6][22]. Performance Metrics - **Consumer Discretionary**: - Best performers include Casinos (23.7%), Apparel Retail (22.7%), and Automotive Retail (19.1%). Weakest sectors include Textiles, Apparel, and Luxury Goods (2.1%) [27][28]. - **Consumer Staples**: - Dollar Stores (49.5%) and Tobacco (29.8%) are leading, while Food Producers (-7.3%) and Alcoholic Beverages (-28.6%) are lagging [29][30]. Valuation Insights - **Valuation Multiples**: Discretionary multiples are about 10% cheaper than historical averages, while Staples are in line with historical averages despite underperformance [31][32]. - **Stock Performance Drivers**: In 2025, multiple expansion has driven stock performance more than earnings growth in both sectors [44]. Earnings Revisions - **Sales Expectations**: Remained stable across consumer discretionary sectors, while earnings per share revisions have shown significant dispersion, particularly declining in textiles and luxury goods due to tariff impacts [51][52]. Conclusion - The current environment is characterized by significant sector rotation and stock-picking opportunities. Analysts recommend focusing on high-quality, defensive stocks with international exposure as the market navigates through economic uncertainties and potential sector shifts [21][22].

Company Overview - Darden Restaurants, Inc. (NYSE:DRI) is an American full-service restaurant company operating brands such as Olive Garden [2]. Financial Performance - For the second fiscal quarter, Darden reported revenue of $3.1 billion, exceeding analyst estimates of $3.07 billion [2]. - Adjusted earnings per share were $2.08, which fell short of the expected $2.10 [2]. Analyst Ratings - BTIG reiterated a Buy rating with a price target of $225 on December 19 [2]. - Stephens maintained an Equal Weight rating but reduced the price target from $215 to $205 on December 11, citing weaker trends at Olive Garden [2]. Market Trends - The CFO noted that high beef prices are impacting margins, although comparable sales at LongHorn Steakhouse remain stable despite this volatility [2]. - Jim Cramer highlighted the influence of chicken prices on Darden's performance, particularly in relation to Olive Garden [3].