Key Takeaways:
Darling Ingredients Inc. (NYSE: DAR) signaled a stronger-than-expected second quarter and outlined a path to add up to $300 million in feed ingredient earnings during its 2026 investor day on May 11.
"April was 'materially stronger' than prior expectations, driven by higher prices, strong volumes, fuel demand and margins," Chairman and CEO Randy Stuewe said in response to an analyst question.
Management guided for an additional $150 million to $300 million of EBITDA from its Feed segment over the next two to three years, citing operational efficiencies and market conditions. The company also highlighted a major policy tailwind from the new Renewable Volume Obligation (RVO), which increases the annual demand requirement to 5.4 billion gallons for 2026 and 2027 from 3.35 billion gallons a year earlier.
The company's stock has returned 67.69% year to date, reflecting a rebound from a down cycle in 2024 and early 2025. Darling said it would prioritize paying down debt to below $3 billion before evaluating broader shareholder returns like dividends or buybacks.
Chief Financial Officer Bob Day said the near-term focus is on deleveraging after funding acquisitions with debt. The company plans to pay down a $500 million bond maturing in April 2027 and aims to keep leverage below 2.5 times. Day projected Darling could generate $4 billion to $6 billion in cash over the next five years in mid-to-up-cycle conditions.
The company's Diamond Green Diesel joint venture, which produces 1.2 billion gallons of renewable diesel, is operating in an "attractive margin environment," according to Executive Vice President Carlos Paz. In its collagen business, the company is launching new wellness products under its Nextida platform, starting with a glucose-control ingredient, with plans for a new product every 18 to 24 months.
The updated guidance suggests management's confidence in sustained demand for its renewable fuels and feed ingredients. Investors will watch second-quarter results, expected in early August, to see if the operational improvements and margin strength from April and May materialize in the reported numbers.
This article is for informational purposes only and does not constitute investment advice.
