Darling Ingredients Inc. (NYSE:DAR) ranks among the best sustainability stocks to invest in. UBS reaffirmed its Buy rating on Darling Ingredients Inc. (NYSE:DAR) on October 24 with a $58 price target. According to the firm, Darling’s main ingredients business, apart from the Diamond Green Diesel (DGD) joint venture, should produce about $875–900 million in EBITDA in fiscal year 2025. The coverage followed Darling’s third-quarter report, which revealed a net income of $19.4 million, falling short of analy ...

Core Insights - No Street GP LP has disclosed a new investment in Darling Ingredients, acquiring approximately 2.25 million shares valued at $69.5 million, representing 4.6% of the fund's $1.5 billion in reportable U.S. equity holdings [1][2]. Company Overview - Darling Ingredients Inc. is a leading global provider of sustainable natural ingredients, converting animal by-products into high-value products, with a market capitalization of $5.5 billion and revenue of $5.8 billion for the trailing twelve months (TTM) [4][5]. - The company's net income for the TTM is reported at $107.8 million [4]. Recent Performance - As of the latest market close, shares of Darling Ingredients were priced at $34.75, reflecting a one-year decline of 15.4%, underperforming the S&P 500 by 30 percentage points [3]. - In the third quarter, Darling's net sales increased to $1.6 billion from $1.4 billion a year ago, with net income rising to $19.4 million from $16.9 million [7]. Strategic Focus - The company emphasizes bio-based solutions and environmental services, positioning itself as a key supplier for industries seeking sustainable raw materials [5]. - Darling Ingredients is advancing tax-credit monetizations, including a $125 million sale, with expectations of an additional $125 million to $175 million by year-end [9]. Investment Perspective - The investment firm No Street is focusing on companies that have been sharply repriced lower, with Darling Ingredients being a cash-flow-centric industrial name that may offer different upside potential compared to high-growth bets in its portfolio [6][10].

Core Insights - SouthernSun Asset Management's "SouthernSun Small Cap Strategy" reported a gross return of 11.73% for Q3 2025, underperforming the Russell 2000 Index and Russell 2000 Value Index which returned 12.39% and 12.60% respectively [1] - Over the trailing twelve months, the strategy returned -0.66% gross, significantly lower than the 10.76% and 7.88% returns of the respective indexes [1] Company Analysis: Darling Ingredients Inc. (NYSE:DAR) - Darling Ingredients Inc. was highlighted as a significant detractor in the SouthernSun Small Cap Strategy for Q3 2025, having previously been a top contributor in Q2 2025 [2][3] - The company specializes in converting edible by-products and food waste into sustainable products and is a leading renewable energy producer [3] - Over the last 52 weeks, Darling Ingredients' stock has decreased by 17.32%, closing at $32.56 on November 4, 2025, with a market capitalization of $5.151 billion [2] - Despite recent challenges, the company is expected to see improvements in top-line and bottom-line results in 2026 due to fundamental and regulatory changes [3] - The base Food and Feed businesses are providing support for the struggling Fuel business, acting as a natural hedge [3] - Darling Ingredients' vertically integrated supply chain and low-cost position have shown resilience against market headwinds [3] - Operational improvements and an upgraded asset base are anticipated to enhance operating profitability and discretionary cash flow as market conditions improve [3]

Market Overview - U.S. markets opened with significant gains, with the Nasdaq rising by 1.47% to reach 8,532.62 and the S&P 500 increasing by 0.91% to 23,546.16, both setting new records [2] - The Dow Jones Industrial Average jumped 310 points, or 0.66%, to 47,517.13 [2] - Small caps, represented by the Russell 2000, initially rose by 0.53% before pulling back [2] Premarket Movers - Notable gainers in premarket trading included Janus Henderson (+14% on buyout rumors), Darling Ingredients (+14%), and Keurig Dr. Pepper (+9.7% following earnings) [4] - Major losers included Organon & Co (-21% due to CEO resignation amid controversy), Carter's Inc. (-9.4% after earnings), and Newmont Corp (-5.1% linked to declining gold prices) [4] Economic Context - U.S. stock futures were on the rise, buoyed by strong earnings reports and a softer-than-expected inflation report from the previous week [5] - The S&P 500 and Nasdaq Composite reached new intraday records, surpassing 6.8K and 23.2K, respectively, while the Dow Jones also exceeded 47.2K [5] - Hopes for a U.S.-China trade deal have increased, with a framework being discussed that includes issues like fentanyl, rare earth metals, and tariffs, as President Trump and President Xi are expected to meet at the APEC [6] Earnings Reports - The week is anticipated to be busy for earnings, with reports from Keurig Dr. Pepper and others, including Welltower, Cadence Design, and Waste Management, expected later in the day [7]

Core Insights - Darling Ingredients Inc. (NYSE:DAR) experienced a significant share price increase of 11.41% on Thursday, closing at $34.67, attributed to improved earnings performance in Q3 [1] - The company's attributable net income rose by 14.22% to $19.36 million, up from $16.95 million year-on-year, while net sales increased by 9.8% to $1.56 billion from $1.42 billion [2] - Chairman and CEO Randall Stuewe highlighted the strong momentum in the core ingredients business, driven by robust fundamentals across all segments, and expressed optimism regarding favorable public policy developments [3] Company Overview - Darling Ingredients Inc. is a global ingredients company that repurposes and transforms animal by-products and food waste from the animal agriculture and food industries into various products, including animal feeds, crops, fertilizer, and renewable diesel [4]

Core Insights - Crude Value Insights provides an investment service and community focused on the oil and natural gas sector, emphasizing cash flow and the companies that generate it, which leads to value and growth prospects with real potential [1] - Subscribers have access to a model account with over 50 stocks, in-depth cash flow analyses of exploration and production (E&P) firms, and live chat discussions about the sector [1] Subscription Offer - A two-week free trial is available for new subscribers, allowing them to explore the services related to oil and gas investments [2]

Financial Data and Key Metrics Changes - The combined adjusted EBITDA for the third quarter was $245 million, compared to $237 million in Q3 2024 and $250 million in the previous quarter [10] - Total net sales for the quarter were $1.6 billion, up from $1.4 billion year-over-year [10] - Gross margins improved to 24.7% for the quarter, compared to 22.1% last year [10][15] - Overall net income was $19.4 million for the quarter, or $0.12 per diluted share, compared to $16.9 million, or $0.11 per diluted share for Q3 2024 [16] Business Line Data and Key Metrics Changes - In the feed segment, EBITDA improved to $174 million from $132 million a year ago, with total sales of $1 billion versus $928 million [10] - The food segment saw total sales of $381 million, higher than $357 million in Q3 2024, with gross margins at 27.5% compared to 23.9% a year ago [11] - The fuel segment, specifically Diamond Green Diesel (DGD), reported a negative EBITDA of $3 million for the quarter, down from positive $39 million in Q3 2024 [12] Market Data and Key Metrics Changes - Global rendering volumes and margins were up both sequentially and year-over-year, driven by strong demand for fats and proteins [6] - In the U.S., robust demand for domestic fats supported by strong agriculture and energy policy helped boost revenue and margins [8] - Export protein demand is showing signs of recovery, with slightly firmer pricing trends emerging [8] Company Strategy and Development Direction - The company is focused on its core ingredients business, expecting EBITDA for 2025 to be in the range of $875 to $900 million, excluding DGD [17] - The management believes that the integrated model of Darling Ingredients provides a competitive advantage that is unmatched in the industry [5] - The company anticipates a shift in public policy that will strengthen American agriculture and energy leadership, which is expected to enhance DGD's earnings potential [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core ingredients business despite short-term challenges in the renewables market [5] - There is optimism regarding the resolution of regulatory uncertainties, particularly around the Renewable Volume Obligation (RVO) [22] - The management highlighted that the current uncertainty around public policy impacts the fuel segment, leading to a cautious outlook [17][64] Other Important Information - The company recorded an income tax benefit of $1.2 million for the quarter, yielding an effective tax rate of -6.3% [16] - Total debt net of cash was $4.01 billion, with expectations for a decrease by year-end as cash is generated from the core business [15] Q&A Session Summary Question: Timeline for clarity on regulatory items like RVO - Management expects clarity on RVO and related regulatory items by December, despite the government shutdown [22] Question: Outlook for feed segment in Q4 - Management indicated that while waste fat prices have dipped, they expect the food segment to be stronger in Q4, potentially meeting guidance [24] Question: Benefits of REMS policy protectionism on feed side - Management noted that the treatment of foreign feedstocks is still unclear, and the overall supply and demand for fats and oils will influence the feed business [28] Question: Factors driving improvement in feed segment margins - Management highlighted improved feedstock prices and strong demand for protein products as key drivers for margin improvement [42] Question: RIN pricing scenarios and industry outlook - Management indicated that RIN prices may need to increase by approximately $0.40 to incentivize production to meet mandates for 2026 [50] Question: Restarting DGD1 - Management stated that DGD1 will only restart when soybean oil margins are profitable enough to justify the costs [79] Question: Outlook for food segment - Management expects a stronger Q4 for the food segment, driven by a rebound in hydrolyzed collagen business and new product launches [82]

Financial Data and Key Metrics Changes - The combined adjusted EBITDA for the third quarter was $245 million, compared to $237 million in Q3 2024 and $250 million in the previous quarter [10] - Total net sales for the quarter were $1.6 billion, up from $1.4 billion year-over-year, with gross margins improving to 24.7% from 22.1% [10][16] - Net income for the quarter was $19.4 million, or $0.12 per diluted share, compared to $16.9 million, or $0.11 per diluted share in Q3 2024 [16] Business Line Data and Key Metrics Changes - In the feed segment, EBITDA improved to $174 million from $132 million a year ago, with total sales reaching $1 billion compared to $928 million [10] - The food segment saw total sales of $381 million, up from $357 million in Q3 2024, with gross margins increasing to 27.5% from 23.9% [11] - The fuel segment, specifically Diamond Green Diesel (DGD), reported an EBITDA of -$3 million, down from +$39 million in Q3 2024, impacted by operational challenges and market dynamics [12][14] Market Data and Key Metrics Changes - Global rendering volumes and margins in the feed segment were up both sequentially and year-over-year, driven by strong demand for fats and proteins [7] - In the U.S., demand for domestic fats was robust, supported by strong agricultural and energy policies, boosting revenue and margins [8] - Export protein demand showed signs of recovery, with slightly firmer pricing trends emerging, although tariff implications affected value-added poultry protein products [8] Company Strategy and Development Direction - The company is focused on its core ingredients business, expecting EBITDA for 2025 to be in the range of $875 to $900 million, excluding DGD [17] - The management believes that the integrated model of Darling Ingredients provides a competitive advantage that is unmatched in the industry [5] - The company anticipates a shift in the renewables market that will enhance DGD's earnings potential, contingent on favorable public policy [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core ingredients business despite short-term challenges in the renewables market due to policy uncertainties [5][9] - The management highlighted that the Renewable Volume Obligation (RVO) is expected to support American agriculture and energy leadership, which could be a catalyst for future growth [17] - There is optimism regarding the recovery of margins in the fourth quarter, although caution was advised due to ongoing regulatory uncertainties [64] Other Important Information - Total debt net of cash was $4.01 billion, a slight increase from $3.97 billion at year-end 2024, with capital expenditures totaling $90 million in Q3 [15] - The company recorded an income tax benefit of $1.2 million for the quarter, yielding an effective tax rate of -6.3% [16] - The company expects to generate around $300 million in production tax credits (PTCs) in 2025, with significant sales anticipated in the fourth quarter [13][14] Q&A Session Summary Question: Timeline for clarity on regulatory items like RVO - Management expects clarity on RVO and related regulatory items by December, despite the government shutdown [22] Question: Outlook for feed segment in Q4 - Management indicated that while waste fat prices have dipped, they expect the food segment to be stronger in Q4, with overall performance close to the previous quarter [24] Question: Benefits of REMS policy protectionism - Management noted that the treatment of foreign feedstocks is still unclear, and the overall supply and demand for fats and oils will influence the feed business [28][29] Question: Drivers of DGD margins - Management clarified that the DGD results were impacted by LCM and operational challenges, and they are optimistic about future margin improvements [34][39] Question: Plans for debt repayment and leverage ratios - Management confirmed they are committed to paying down debt and expect their debt coverage ratio to be around three by year-end [51][52] Question: RIN pricing scenarios and industry compliance - Management indicated that RIN prices may not see a significant lift until clarity on enforcement dates is provided, which is expected by the end of the year [76]

Financial Data and Key Metrics Changes - The combined adjusted EBITDA for Q3 2025 was $245 million, compared to $237 million in Q3 2024 and $250 million in the previous quarter [12] - Total net sales for the quarter were $1.6 billion, up from $1.4 billion year-over-year [12] - Gross margins improved to 24.7% for the quarter, compared to 22.1% a year ago [12] Business Line Data and Key Metrics Changes - In the Feed segment, EBITDA improved to $174 million from $132 million a year ago, with total sales reaching $1 billion compared to $928 million [12] - The Food segment saw total sales of $381 million, up from $357 million in Q3 2024, with gross margins increasing to 27.5% from 23.9% [13] - The Fuel segment, specifically Diamond Green Diesel (DGD), reported a negative EBITDA of $3 million, down from a positive $39 million in Q3 2024 [14] Market Data and Key Metrics Changes - Global rendering volumes and margins in the Feed segment were up both sequentially and year-over-year, driven by strong demand for fats and proteins [8] - Export protein demand is showing signs of recovery, although tariff implications have impacted value-added poultry protein products [9] - The renewables market faced headwinds due to higher feedstock costs and lower RINs and LCFS pricing [10] Company Strategy and Development Direction - The company is focused on strengthening its integrated model, which is seen as a competitive advantage in the industry [6] - Management is optimistic about the rollout of public policy aimed at enhancing American agriculture and energy leadership, which is expected to boost DGD's earnings potential [11] - The company plans to provide financial guidance exclusively for its core ingredients business, expecting EBITDA in the range of $875 million to $900 million for the full year 2025 [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged short-term uncertainty in the renewables market due to delays in the renewable volume obligation (RVO) ruling [7] - The company remains confident that pressures in the renewables segment are temporary and anticipates a positive shift in the market [10] - Management expressed optimism about the core ingredients business, expecting continued strong performance despite challenges in the renewables segment [20] Other Important Information - Total debt net of cash was $4.01 billion as of September 27, 2025, compared to $3.97 billion at the end of 2024 [18] - The company recorded an income tax benefit of $1.2 million for the quarter, resulting in an effective tax rate of -6.3% [19] - The company expects to generate around $300 million in production tax credits (PTCs) in 2025, with significant cash inflows anticipated in the fourth quarter [16] Q&A Session Summary Question: Timeline for clarity on regulatory items - Management expects clarity on RVO and exemptions by December, despite the government shutdown [24][25] Question: Feed outlook for Q4 - Management indicated that while waste fat prices have dipped, strong performance is expected in the food segment, with a narrow EBITDA range anticipated [26][28] Question: RIN policy protectionism benefits - Management noted that the treatment of foreign feedstocks is still unclear, and the need for imports may depend on domestic supply and demand dynamics [32][34] Question: DGD margins and drivers - Management clarified that DGD results were not as strong as hoped, and the capture rate was affected by LCM accounting practices [38][40] Question: Feed segment margin improvement - Management highlighted that improved protein prices and strong demand from aquaculture markets contributed to better margins in the feed segment [46][48] Question: RIN pricing scenarios - Management indicated that RIN prices may need to rise by approximately $0.40 to incentivize production to meet the 2026 mandate [57] Question: Debt repayment plans - Management confirmed that they are committed to paying down debt and expect to maintain a debt coverage ratio around three times [58][61] Question: DGD restart conditions - Management stated that DGD1 will only restart when soybean oil margins are profitable enough to justify the operational costs [95]

Financial Data and Key Metrics Changes - The combined adjusted EBITDA for the third quarter was $245 million, compared to $237 million in the third quarter of 2024 and $250 million in the previous quarter [8][10] - Total net sales for the quarter were $1.6 billion, up from $1.4 billion year-over-year, while gross margins improved to 24.7% from 22.1% [8][10] - Overall net income was $19.4 million for the quarter, or $0.12 per diluted share, compared to net income of $16.9 million, or $0.11 per diluted share for the same quarter last year [15] Business Line Data and Key Metrics Changes - In the feed segment, EBITDA improved to $174 million from $132 million a year ago, with total sales reaching $1 billion compared to $928 million [9][10] - The food segment saw total sales of $381 million, higher than $357 million in the third quarter of 2024, with gross margins increasing to 27.5% from 23.9% [9][10] - The fuel segment, specifically Diamond Green Diesel (DGD), reported a negative EBITDA of $3 million for the quarter, down from positive $39 million in the third quarter of 2024 [10][12] Market Data and Key Metrics Changes - Global rendering volumes and margins in the feed segment were up both sequentially and year-over-year, driven by strong demand for fats and proteins [5][6] - Export protein demand is showing signs of recovery, with slightly firmer pricing trends emerging, although tariff implications have impacted value-added poultry protein products [6][9] - The renewables market continues to face headwinds, with higher feedstock costs and lower RINs and LCFS pricing impacting margins [7][10] Company Strategy and Development Direction - The company is focused on its core ingredients business, expecting EBITDA for 2025 to be in the range of $875 to $900 million, excluding DGD [16] - Management believes that the integrated model of Darling Ingredients provides a competitive advantage that is unmatched in the industry [4] - The company is optimistic about the future, anticipating that public policy changes will strengthen American agriculture and energy leadership, which will enhance DGD's earnings potential [7][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core ingredients business despite short-term uncertainties in the renewables market [4][16] - The company is optimistic about the upcoming clarity on regulatory items, including the Renewable Volume Obligation (RVO) [20] - Management noted that the current uncertainty around public policy impacts the fuel segment, but they remain focused on what they can control [16] Other Important Information - Total debt net of cash was $4.01 billion, with a minimal increase from $3.97 billion at the end of 2024 [14] - The company recorded an income tax benefit of $1.2 million for the quarter, yielding an effective tax rate of -6.3% [15] - The company expects to generate around $300 million in production tax credits in 2025, with significant sales anticipated in the fourth quarter [12][13] Q&A Session Summary Question: Timeline for clarity on regulatory items - Management expects clarity on RVO and exemptions by December, amid ongoing government shutdown [20] Question: Feed outlook for the fourth quarter - Management indicated that while waste fat prices have dipped, they expect the food segment to be stronger in Q4, with a narrow range for the business [21][23] Question: Benefits of REMS policy protectionism - Management noted uncertainty around how the EPA will treat foreign feedstocks, which will depend on various factors [26][28] Question: Drivers of DGD margins - Management clarified that DGD results were not as good as hoped, and the capture rate was affected by LCM accounting practices [29][30] Question: Outlook for the feed segment going into 2026 - Management expects continued improvement in feed segment margins, driven by protein price recovery and strong demand [35][37] Question: RIN pricing scenarios - Management indicated that RIN prices need to increase by approximately $0.40 to incentivize production to meet the 2026 mandate [43][44] Question: Debt repayment plans - Management confirmed they are committed to paying down debt and expect their debt coverage ratio to be around three times by year-end [45][46] Question: DGD1 restart conditions - Management stated that DGD1 will only restart when soybean oil margins are profitable enough to justify the catalyst costs [70][72] Question: Food segment outlook - Management expects a stronger Q4 for the food segment, with a rebound in hydrolyzed collagen business and new product launches [73][75]