Darden Restaurants (DRI) shares are positioned for "further upside" as Olive Garden's performance is expected to improve with various initiatives, UBS Securities said in a note emailed Monday.

The firm said it expects strengthening trends at Olive Garden despite macro pressures, including lower-income spending headwinds and unfavorable weather that likely impacted fiscal Q3 traffic and same-store sales. UBS also noted continued momentum at LongHorn Steakhouse.

For fiscal Q3, UBS forecasts Darden's blended same-store sales to rise 1.6%, below the consensus estimate of 1.9%. The projection includes 1.2% growth at Olive Garden and 4.5% at LongHorn. The firm expects Olive Garden trends to improve into fiscal Q4, supported by several initiatives, including delivery expansion, menu innovation, and increased marketing.

Investors will be focused on the company's fiscal 2025 guidance and any potential tightening of targets, UBS said. Darden's current outlook includes total sales of $12.1 billion, same-store sales growth of 1.5%, and adjusted earnings of $9.40 to $9.60 per share.

Looking ahead, the firm sees multiple levers supporting Olive Garden's sales into fiscal 2026, with Darden maintaining solid profitability and a long-term total shareholder return target of 10% to 15%.

Despite macroeconomic challenges, investor sentiment skews positive heading into the results, according to the note.

The firm has a buy rating on Darden Restaurants with a price target of $210.

Price: 187.81, Change: +1.82, Percent Change: +0.98