Darling Ingredients Beats EPS Estimates

Darling Ingredients (DAR 6.80%), a leader in converting waste products from the animal agriculture and food industries into useful ingredients, released its fourth-quarter results on Feb. 6. The company reported earnings per share (EPS) of $0.63, significantly beating the analysts’ estimate of $0.42. However, total revenue of $1.42 billion didn’t meet the consensus forecast of $1.449 billion and was down from $1.61 billion in the prior-year period.

Source: Analysts’ estimates for the quarter provided by FactSet.

Business Overview and Strategic Focus

Darling Ingredients operates a diversified business transforming by-products from the food and agriculture sectors into value-added products. Its diversification across feed, food, and fuel ingredients is a strategic advantage. It boasts operations in North America, South America, Europe, China, Asia, and Australia. The sustainability and renewable energy sectors have been areas of focus recently, including biofuels and organic fertilizers.

Recently, the company has concentrated on strategic acquisitions and expanding its geographical reach, particularly in the Americas, in response to increasing global demand for sustainable products. The company’s diversification across product lines and geographies helps mitigate risks associated with market volatility and regulatory changes.

Quarter Performance Insights

In the quarter, net income rose 20.7% year over year to $101.9 million, amounting to earnings per share of $0.63. This marked a notable 50% beat over analysts’ consensus estimate. The increase stemmed from improved profitability in some segments despite an overall revenue decline.

The company’s feed ingredients segment faced decreased demand as net sales slid to $924.2 million from $1.046 billion in the prior-year period. Food ingredients reported $361.7 million in sales, down from $423.8 million, partly due to softer demand in critical markets like China. Fuel ingredients’ sales declined to $131.9 million from $144.6 million, hampered by weaker pricing and uncertainties over the outlooks for governments’ renewable energy policies.

The company’s Diamond Green Diesel joint venture sold 293.8 million gallons of renewable diesel, although its profitability declined due to market pressures. Adjusted EBITDA also declined by 17.5% to $289.5 million from $350.9 million.

The company reduced its debt load to $4 billion, with a leverage ratio of 3.93. Cash reserves totaled $76 million. Capital expenditures reached $73.3 million for the quarter and $332.5 million annually, reflecting ongoing investments in renewable energy initiatives.

Material events included the expansion of its renewable aviation fuel capabilities, a move that aligns with long-term growth strategies focused on sustainability.

Outlook and Future Prospects

In 2025, Darling Ingredients anticipates a strengthening position with an estimated adjusted EBITDA of $1.25 billion to $1.30 billion. This outlook builds on expectations for higher fat prices and capacity growth through planned plant turnarounds and sustainable aviation fuel sales integration.

Investors should keep an eye on regulatory shifts relating to fuel markets and potential growth in the sustainable aviation fuel sector, as it could drive significant changes in revenue and profitability for the company.

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