Shares of Darden Restaurants (DRI) - Get Darden Restaurants, Inc. Report were rising Wednesday after analysts at Stifel upgraded the Olive Garden parent to buy from hold and urged investors to buy the dip caused by the news of the CEO transition announced last week.
"We continue to believe Darden's management team is one of the strongest in the industry, with a demonstrated ability to drive top line sales while protecting margin in the face of inflationary pressures," wrote Stifel Analysts Chris O'Cull, Alec Estrada and Patrick Johnson in a note published Wednesday.
"Shares declined following a strong earnings report last Friday, which we believe was driven by the concurrent announcement of CEO Gene Lee's retirement at the end of May," O'Cull added.
On Dec. 17, the company announced that Eugene "Gene" Lee, who steered Darden Restaurants during the pandemic and oversaw a quadrupling of its market cap, was retiring as chief executive after seven years.
"While we were not surprised by the initial weakness, we are confident investors will quickly realize his successor, Rick Cardenas, can continue to guide the company on a similar strategic growth path," the note added.
The owner of LongHorn Steakhouse, Capital Grille and Cheddar's Scratch Kitchen appointed President and Chief Operating Officer Ricardo Cardenas to succeed Lee as CEO from May 30. Cardenas will also join the board of the multi-restaurant operator.
Stifel also noted that operational efficiencies at Darden will help the company outperform rivals.
"The company’s scale confers significant advantages in marketing, data analytics/technology, and supply chain management — rivaling even larger QSR [quick service restaurant] players — which should allow Darden to take share from smaller chains and independent operators," the note added.
On Monday, analysts at Keybanc and Credit Suisse reaffirmed their buy ratings for Darden. They were bullish on the company's outlook while noting that rising infections and inflation could hurt its valuation.