Darling Ingredients 2025 Q1 Earnings Misses Targets as Net Income Drops 129%

Darling Ingredients (DAR) reported its fiscal 2025 Q1 earnings on May 07th, 2025. The company faced a challenging quarter, with earnings falling short of expectations due to a significant drop in net income. Despite the downturn, management remains optimistic, focusing on stability in core operations. The company reaffirmed its guidance for the year, indicating potential improvements in the biofuel sector. Analysts viewed the results as below expectations, but the company's guidance remains in line with prior forecasts.

Revenue
Darling Ingredients reported a total revenue of $1.38 billion for Q1 2025, reflecting a 2.8% decrease from the $1.42 billion reported in the same quarter of the previous year. The Feed Ingredients segment generated $896.28 million, while Food Ingredients contributed $349.24 million. The Fuel Ingredients segment added $135.07 million to the total revenue. There were no revenues reported for the Corporate segment.

Earnings/Net Income
Darling Ingredients experienced a downturn in earnings, posting a net loss of $0.16 per share in Q1 2025, compared to a profit of $0.51 per share in Q1 2024. The company recorded a net loss of $23.81 million, a significant decline from the net income of $81.59 million reported in the same period last year. The EPS results reflect a challenging quarter for the company.

Price Action
The stock price of Darling Ingredients has slightly decreased by 0.63% during the latest trading day, but it has increased by 2.42% over the past week and has surged 12.83% month-to-date.

Post-Earnings Price Action Review
Over the past five years, buying shares of Darling Ingredients (DAR) following a quarter-over-quarter revenue decline and holding them for 30 days resulted in an average return of 8.94%, which underperformed the benchmark by 20.64%. The strategy exhibited a Sharpe ratio of 0.22, indicating a risk-adjusted performance, with a maximum drawdown of -14.24% and a volatility of 9.78%. The compound annual growth rate (CAGR) for this strategy stood at 2.16%. These figures highlight the risk and potential reward associated with this investment approach, emphasizing the challenges faced by the company in periods of declining revenues.

CEO Commentary
Randall C. Stuewe, Chairman and Chief Executive Officer, highlighted that despite challenges in the biofuel industry during Q1 2025, Darling Ingredients' core business demonstrated resilience, generating positive cash flow and exhibiting stability. He noted, “While the biofuel environment continues to adjust, margins have started to improve,” reflecting optimism driven by strong market demand for domestic fats. Stuewe reaffirmed commitment to managing the balance sheet effectively, saying, “We expect our core business to continue to perform well,” indicating confidence in the company’s ability to navigate challenges and capture growth opportunities.

Guidance
Darling Ingredients expects to generate approximately $950 million to $1 billion in EBITDA for fiscal year 2025, maintaining guidance of $1.25 to $1.30 billion for Combined Adjusted EBITDA. The company anticipates improvements in margins for its Diamond Green Diesel joint venture and projects capital expenditures of $63 million for the first quarter of 2025.

Additional News
In recent developments, Darling Ingredients has been actively managing its financial position. The company repurchased approximately $35 million worth of its common stock during the first quarter of 2025, demonstrating its commitment to enhancing shareholder value. Additionally, the company paid down $146.2 million in debt, reflecting a strategic focus on strengthening its balance sheet. Institutional investors have shown interest as well, with M&T Bank Corp and Ironwood Investment Management LLC slightly increasing their holdings in the company. Despite the challenging earnings report, these actions and investor interest indicate confidence in the company's long-term strategy and potential for recovery.