Darling Ingredients Navigates a Challenging Year with Strategic Portfolio Shift
Darling Ingredients Inc (NYSE:DAR) reported financial results for the fourth quarter and full fiscal year 2025, delivering a top-line beat but facing significant year-over-year declines in profitability. The company's earnings release highlighted a strategic realignment of its business portfolio, which came with substantial one-time charges, while its core operations demonstrated resilience.
Earnings Snapshot: Revenue Beat Meets Profit Pressure
The sustainable ingredients producer reported fourth-quarter revenue of $1.71 billion, a 20.6% increase from the $1.42 billion reported in the same period last year. This figure comfortably surpassed Wall Street's consensus estimate of $1.55 billion. The sales growth was attributed to an extra week in the fiscal year and a favorable lag in fat pricing, which supported higher volumes.
On the bottom line, the picture was more complex. The company reported net income attributable to Darling of $56.9 million, or $0.35 per diluted share. This represents a significant decline from the $101.9 million, or $0.63 per diluted share, earned in Q4 2024. However, the reported GAAP EPS of $0.35 was in line with analyst expectations. This alignment with estimates, despite the year-over-year drop, is largely due to substantial one-time charges the company absorbed during the quarter.
Key Factors Impacting Quarterly Performance
The earnings press release detailed several critical items that shaped the quarterly results:
- Portfolio Restructuring: The company took a $58.0 million charge for restructuring and asset impairment, primarily related to its Enviroflight and CTH natural casing businesses. This move is part of a strategy to sharpen its focus on core strengths.
- Diamond Green Diesel (DGD) Performance: The renewable diesel joint venture had a challenging year. For the full year, DGD sold 1.003 billion gallons at an average EBITDA of $0.21 per gallon, down from stronger prior-year margins. However, Q4 performance improved sequentially, with EBITDA of $0.41 per gallon on 285.3 million gallons sold.
- Strong Core Ingredients EBITDA: Excluding DGD, the company's core ingredients business showed strength. Combined Adjusted EBITDA for Q4 was $336.1 million, up from $289.5 million a year ago. For the full year, Combined Adjusted EBITDA was $1.03 billion, slightly down from $1.08 billion in 2024.
Market Reaction and Forward Outlook
Following the earnings release, Darling Ingredients' stock traded down approximately 5% in after-hours activity. This negative reaction likely reflects investor concern over the steep year-over-year decline in net income and the significant restructuring charges, even as revenue exceeded expectations.
Looking ahead, management provided exclusive guidance for its core ingredients business, excluding DGD. For the first quarter of 2026, the company estimates core ingredients adjusted EBITDA to be between $240 million and $250 million. Chairman and CEO Randall C. Stuewe noted that while current market pricing may modestly impact core ingredients performance in Q1, the company is positioned for momentum in 2026. He also pointed to the potential for the EPA’s upcoming Renewable Volume Obligation to provide a constructive backdrop for fat prices.
Financial Position and Strategic Focus
The company ended the fiscal year with a solid liquidity position, having monetized $255 million of Production Tax Credits to improve cash generation. Management stated the intent to use this for continued deleveraging in 2026. The preliminary leverage ratio stood at 2.90X as of January 3, 2026.
In summary, Darling Ingredients' Q4 report paints a picture of a company in transition. It successfully grew revenue and delivered EBITDA growth in its core operations while making tough, costly decisions to streamline its portfolio. The market's initial reaction suggests a focus on the near-term profit decline, but the company's strategic repositioning and guidance for a robust core business performance in Q1 2026 provide a foundation for the future.
For a detailed look at historical earnings and future analyst estimates for Darling Ingredients, visit the earnings estimates page.
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