On Monday, Jefferies adjusted its outlook on Darling Ingredients (NYSE: NYSE:DAR), reducing the stock's price target to $44 from the previous $47, while retaining a Buy rating. The firm anticipates the stock may face near-term challenges but expects a possible recalibration after the company's third-quarter earnings report. The forecast suggests that management might revise the full-year 2024 guidance downward and provide preliminary insights for 2025 during that time.
The firm's analysis indicates that Darling Ingredients is likely to fall short of third-quarter expectations. This anticipated underperformance is attributed to the improvement in core ingredients being overshadowed by declining renewable diesel (RD) margins.
Despite the near-term pressures, the firm's stance remains cautiously optimistic for the year 2025, citing an improving macroeconomic environment, including factors such as the Low Carbon Fuel Standard (LCFS) and Sustainable Aviation Fuel (SAF) policies.
Jefferies has expressed a belief that these macroeconomic elements will eventually bolster Darling Ingredients' market position. The firm's maintained Buy rating suggests confidence in the company's long-term prospects despite the immediate hurdles and anticipated adjustments in the company's financial guidance.
The revised price target of $44 represents Jefferies' current valuation estimate for Darling Ingredients' shares, reflecting both the near-term headwinds and the potential for recovery and growth influenced by the macroeconomic landscape. The firm's commentary underscores the expectation of a strategic update from the company following its third-quarter earnings release, which investors will closely monitor for indications of future performance and strategic direction.
In other recent news, Darling Ingredients is set to announce its third-quarter earnings soon, with analysts predicting potential discrepancies from market expectations. The company's EBITDA for the third quarter might fall short of consensus, and a downward revision of its 2024 EBITDA guidance from the current $1.3-1.4 billion to less than $1.2 billion is anticipated. Citi has adjusted its price target for Darling Ingredients to $46 from $48, maintaining a Buy rating.
On the other hand, Baird has kept an Outperform rating with a steady price target of $60. TD Cowen has revised its price target to $43, maintaining a Hold rating. These assessments consider potential legislative changes, fluctuating commodity prices, and the company's future earnings prospects.
In terms of company news, Darling Ingredients has appointed Randy Hill as an independent director to its board, enhancing its financial analysis and global reporting capabilities.
The company's joint venture, Diamond Green Diesel (DGD), secured a contract to supply sustainable aviation fuel to John F. Kennedy International Airport, aligning with plans to upgrade nearly half of its 470 million gallon annual capacity to sustainable aviation fuel by 2024.
These are the recent developments in Darling Ingredients.
InvestingPro Insights
Recent data from InvestingPro adds depth to Jefferies' analysis of Darling Ingredients (NYSE: DAR). The company's market capitalization stands at $5.87 billion, with a P/E ratio of 16.02, suggesting a relatively moderate valuation compared to some industry peers. However, InvestingPro Tips indicate that analysts anticipate a sales decline in the current year, aligning with Jefferies' cautious near-term outlook.
Despite these challenges, Darling Ingredients maintains a strong financial position. An InvestingPro Tip highlights that the company's liquid assets exceed short-term obligations, providing a buffer against potential market volatility. This financial stability could be crucial as the company navigates the anticipated headwinds in the renewable diesel market.
The company's revenue for the last twelve months as of Q2 2023 was $6.11 billion, with a gross profit margin of 23.77%. While these figures demonstrate Darling's significant market presence, the revenue growth rate of -13.44% over the same period corroborates Jefferies' concerns about near-term performance.
Looking ahead, InvestingPro Tips suggest that despite the expected sales decline, analysts predict the company will remain profitable this year. This projection, combined with Jefferies' optimistic long-term view, indicates potential resilience in Darling's business model.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Darling Ingredients' financial health and market position.
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