Shares of Darling Ingredients Inc. (NYSE: DAR) surged 5.24% on Thursday, despite the company reporting weaker-than-expected financial results for the third quarter of 2024. The stock rally reflects investor optimism about the company's strategic initiatives and long-term growth prospects, even as it navigates near-term challenges.
In the third quarter, Darling Ingredients' net income plunged 86% year-over-year to $16.9 million, or $0.11 per diluted share, missing analyst estimates. Total net sales declined 13% to $1.4 billion, also falling short of expectations. The company attributed the weaker performance to lower gross margins, reduced earnings from its Diamond Green Diesel joint venture, and softer demand in its Food segment.
However, Darling Ingredients made progress in strengthening its balance sheet, paying down approximately $192 million in debt during the quarter. Additionally, it received $111.2 million in cash dividends from Diamond Green Diesel, providing a financial boost. The company also reiterated its 2024 adjusted EBITDA guidance range of $1.15 billion to $1.175 billion.
During the earnings call, Darling Ingredients highlighted several positive developments that could drive future growth. These include the launch of new collagen-based products in its specialty ingredients business, the commissioning of its sustainable aviation fuel unit, and optimism about regulatory clarity for low-carbon fuel standards and tax credits in 2025.
Analysts at Piper Sandler and Jefferies maintained or raised their buy ratings on Darling Ingredients, expressing confidence in the company's long-term prospects. They cited factors such as expected improvements in margins, better performance from Diamond Green Diesel, and the potential of the company's new initiatives to offset current challenges.
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