12:02 PM EST, 12/17/2024 (MT Newswires) -- Darden Restaurants' ( DRI ) upcoming Q2 report on Thursday, will likely show "mixed" results, with some improvement in industry trends but still challenges for the company's core brand, Olive Garden ( DRI ), Morgan Stanley said in a report Tuesday.

Sentiment around the company has been more negative recently regarding Olive Garden's ( DRI ) momentum, despite a slight post-election shift favoring casual dining and strong industry data from November, Morgan Stanley said, adding that after a solid start to Q2, momentum "faded," leading to a slight sales reduction.

"[Olive Garden's ( DRI )] momentum still key to improving sentiment, and category challenges likely holding brand back in part," the report said.

The company's other brands, notably LongHorn Steakhouse, have shown resilience, benefiting from the ongoing trend of consumers trading down from "fine dining," Morgan Stanley said.

The investment bank projects Q2 earnings per share of $2.01, slightly below its previous estimate of $2.06 and the Wall Street's $2.02, with restaurant-level margins, or RLMs at 18.9%. For the full year, the RLM estimate remains at 19.9%, and Morgan Stanley expects minimal food cost benefits, the report said.

With the acquisition of Tex-Mex restaurant chain Chuy's, Morgan Stanley said its fiscal-year EPS estimate has slightly decreased to $9.41 from $9.45, compared to the Wall Street's $9.43 and guidance of $9.40 to $9.60. "We don't expect any changes to the bottom-line guidance this quarter, although top-line estimates have been adjusted for Chuy's," the report said.

Morgan Stanley kept its overweight rating on Darden Restaurants ( DRI ) and raised its price target to $193 from $188.

Price: 165.88, Change: -1.69, Percent Change: -1.01