This story has been updated from 2:35 pm EST with analysts comments, stock price update.
NEW YORK (TheStreet) -- Shares of Darden Restaurants Inc. (DRI) are down 1.6% to $47.50 after the company reported a quarterly loss, and as it faces activist investor Starboard Value LP's release of its revised plan to boost Darden's profit and stock price.
Starboard, one of Darden's largest investors with an 8.8% stake, late Thursday announced a proposal that included plans to sell Darden's real estate, franchise its restaurants, spin off The Capital Grille, Yard House and other chains and fix the flagship Olive Garden chain, Reuters noted. Analysts indicated Friday that regardless of Starboard's initiatives, pressure is mounting for Darden to make changes at its struggling Olive Garden brand.
Starboard, which also is seeking to replace Darden's entire 12-member board, said it has identified up to $326 million in cost savings. It believes its strategy could make Darden's stock worth as much as $86 per share, even before it got to work on fixing Olive Garden or selling restaurants to franchisees.
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Darden reported a net loss of $19.3 million, or 14 cents per share, from continuing operations for its first quarter ended Aug. 24. It said quarterly sales at Olive Garden restaurants open at least 16 months declined 1.3%.
Here's what analysts had to say.
Lynne Collier, Sterne Agee (Buy; $55 PT)
We are maintaining our Buy rating on DRI as we believe change is underway at Olive Garden whether or not activist investor Starboard Value is able to secure a Board majority at the upcoming shareholder meeting. The initial read on the Olive Garden remodel program appears promising and we believe there are considerable operational and cost-cutting opportunities ahead. We view the risk/reward as favorable as shares are supported by a 4.6% dividend yield. We are maintaining our $55 price target.
Jeff Farmer, Wells Fargo Securities (Outperform; $52-$54)With the Olive Garden turnaround, there is no doubt in our view that a lot of contemplation is taking place by management -- but investors we have spoken with are frustrated with what is perceived as a slow pace of action, or at the very least are looking for more detailed progress reports. While conceding that DRI, without a CEO and with eight board members not running for re-election, is somewhat hamstrung in terms of more aggressively pursuing Olive Garden's "Brand Renaissance Plan" - we believe investors want very clear road markers as to the progress being made along each point of the plan (operational improvements, reducing kitchen complexity, marketing shift, service model, etc.).
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TheStreet Ratings team rates DARDEN RESTAURANTS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DARDEN RESTAURANTS INC (DRI) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
- You can view the full analysis from the report here: DRI Ratings Report