Darling Declines On 3Q Sales Miss; Street Sees 20% Upside

Shares of Darling Ingredients are down 2% in Wednesday’s pre-market session after the animal food manufacturer’s 3Q revenues of $850.6 million missed analysts’ estimates of $854.5 million. Revenues increased by 1% year-on-year.

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Darling’s (DAR) 3Q earnings of $0.61 per share beat Street estimates of $0.44 per share and were up from $0.15 per share a year ago.

The company’s Diamond Green Diesel (DGD) recorded sales volume of approximately 80 million gallons in 3Q. The company’s CEO Randall C. Stuewe said “our vertically integrated supply chain that supports the lowest cost production system and the lowest carbon scoring feedstocks in North America continued to produce strong results.” The company expects to produce 285 million gallons of renewable diesel for 2020.

Stuewe further said that “We continue to see improved margins in our global rendering through better cost management and our hydrolyzed collagen sales most affected by the economic impact of COVID have seen a solid turnaround.” (See DAR stock analysis on TipRanks)

On Oct. 22, Roth Capital analyst Craig Irwin more than doubled the stock’s price target to $84 (84.9% upside potential) from $38 and maintained a Buy rating, reflecting earnings power of DGD-II and DGD-III. The analyst believes that the company’s EBITDA could reach over $1.8 billion by 2025 with no debt. Further, he forecasts annual distributions of over $1 billion from DGD by 2025.

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 6 Buys and 2 Holds. The average price target of $54.57 implies upside potential of about 20.2% to current levels. Shares have already gained 61.8% year-to-date.