On Friday, BMO Capital Markets adjusted its outlook on Darling Ingredients Inc. (NYSE:DAR), a global developer and producer of sustainable natural ingredients from bio-nutrients, raising its price target to $55.00 from $54.00. The firm maintained an Outperform rating on the stock.
The revision followed Darling Ingredients' second-quarter earnings report, where the company posted an EBITDA of $274 million, roughly aligning with the adjusted market expectations of $277 million. Despite weaker performance in the Food and Diamond Green Diesel (DGD) segments, the company's Feed EBITDA showed stronger results.
Darling Ingredients confirmed its 2024 EBITDA outlook, which remains between $1.3 billion and $1.4 billion. The company expressed confidence that internal initiatives would significantly enhance performance in the second half of the year. Based on these projections, BMO Capital has slightly increased its estimates and the stock's price target.
The analyst's commentary highlighted that while their 2024 EBITDA estimate sits below the company's guidance, the forecasts for the second half of the year suggest an annual run-rate of approximately $1.4 billion for the base business. This is before considering additional growth drivers expected in 2025, such as sustainable aviation fuel (SAF) and policy actions.
The updated valuation implies an attractive risk/reward balance, with the stock trading at only seven times BMO Capital's anticipated 2025 EBITDA, which the firm believes has the potential for further upside.
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