Darden Restaurants (NYSE:DRI) Generates More Questions than Answers

Darden Restaurants (NYSE:DRI) is a mixed bag of contradictory data, and going forward it's difficult to ascertain which direction the company will go, and how far.

UBS (NYSE:UBS) noted, "Our EPS estimate for F2Q is $0.55 (+27% YOY, cons $0.54), based on 2.5% blended same store sales (SSS) growth. Our estimates by brand are: Red Lobster flat, Olive Garden 3%, LongHorn 6%. We believe that LongHorn sales accelerated behind national cable advertising, and that RL sales may have experienced modest improvement due to a greater emphasis on value during the quarter.

"Heading into calendar 2011, major questions/issues for DRI shares include: 1) Can Darden deliver EPS upside and move to a “recovery premium valuation”, creating upside potential to our $57 price target?, 2) Will sales underperformance continue at Red Lobster?, 3) Will food and energy related costs become a constraint to EPS in FY12?, and 4) Will strong sales at Long Horn and low interest rates encourage Darden to once again acquire a restaurant chain?"

UBS maintains a "Buy" on Darden Restaurants, which closed Monday at $48.54, down $0.94, or 1.90 percent. They raised their price target on them from $54 to $57, suggesting they're a little more bullish than bearish on the restaurant company.