NEW YORK (TheStreet) -- Shares of Darden Restaurants Inc. DRI are up this afternoon by 1.40% to $51.47 after the company issued a statement rejecting a proposal by Starboard Value LP and its affiliates.
In part, it read: "We are confident in the initiatives we have announced to improve performance and enhance shareholder value. Optimizing the value of Darden's properties has always been a focus for the company.
"The board of directors, with the assistance of two independent financial advisors and legal counsel, again recently conducted an extensive assessment of alternatives for Darden's real estate and determined that a real estate separation would not enhance long-term shareholder value."
Goldman, Sachs & Co. is the company's financial advisor. Morgan Stanley serves as a financial advisor and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to the board.
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TheStreet Ratings team rates DARDEN RESTAURANTS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DARDEN RESTAURANTS INC (DRI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, DRI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, DARDEN RESTAURANTS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has decreased to $363.70 million or 13.87% when compared to the same quarter last year. Despite a decrease in cash flow DARDEN RESTAURANTS INC is still fairing well by exceeding its industry average cash flow growth rate of -32.46%.
- You can view the full analysis from the report here: DRI Ratings Report