Citi has reaffirmed its Buy rating on shares of Darling Ingredients (NYSE: NYSE:DAR), maintaining a $48.00 price target. The endorsement follows recent investor meetings in London with Darling Ingredients' top executives, including CEO Randy Stuewe and CFO Brad Phillips.
During these discussions, the company outlined several factors that could potentially drive its earnings higher by 2025, or possibly earlier.
Key points highlighted by Darling Ingredients included legislative changes in California's Low Carbon Fuel Standards and federal carbon-based tax credits that could enhance earnings at its Diamond Green Diesel (DGD) joint venture.
Additionally, the company is anticipating a boost in earnings from the introduction of higher margin sustainable aviation fuel, expected to be launched in late 2024.
The company also pointed to the potential for rising soybean oil prices, which could be spurred by tightening inventories and growing demand from the biofuels sector. However, Citi expressed a more conservative outlook regarding the soybean oil price projections.
Furthermore, Darling Ingredients provided insights into preliminary earnings assumptions for 2025 and discussed tax credit accounting changes that might redistribute profits from DGD to the base business.
In other recent news, Darling Ingredients reported a second-quarter EBITDA of $274 million, net income of $78.9 million, and net sales totaling $1.5 billion.
The company's joint venture, Diamond Green Diesel (DGD), has secured a contract to supply sustainable aviation fuel to John F. Kennedy International Airport, marking a significant development.
On the analyst front, Baird reaffirmed an Outperform rating on Darling Ingredients, while BMO Capital Markets raised its price target from $54.00 to $55.00, also maintaining an Outperform rating.
InvestingPro Insights
As Darling Ingredients (NYSE:DAR) positions itself for potential growth, real-time data from InvestingPro provides context for investors considering the company's stock. With a market capitalization of $5.84 billion and a P/E ratio of 16.16, investors are looking at a company with a solid valuation. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 17.5, reflecting expectations of continued profitability.
Despite a challenging revenue environment, with a decline of 13.44% in the last twelve months as of Q2 2024, Darling Ingredients maintains a gross profit margin of 23.77%, indicating a robust ability to generate earnings relative to its sales. Moreover, the company's liquid assets exceed its short-term obligations, suggesting financial stability in meeting its immediate liabilities.
InvestingPro Tips highlight that while analysts have revised earnings downwards for the upcoming period and anticipate a sales decline in the current year, Darling Ingredients has been profitable over the last twelve months. Additionally, the company's stock has experienced volatility, with a significant drop over the last week, yet analysts predict the company will remain profitable this year. For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/DAR.
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