DAR: Biofuel Policy Clarity Will Drive Bullish Rebound Despite Lowered Outlook

Analysts have trimmed their 12 month price target on Darling Ingredients to $42 from $46. This reflects expectations for softer Q3 EBITDA versus consensus and a likely downward revision to the full year outlook amid ongoing uncertainty around renewable volume obligation and small refinery exemption allocations.

Analyst Commentary

Bullish Takeaways

• Bullish analysts highlight that the maintained Buy rating reflects confidence in Darling Ingredients long term earnings power despite near term volatility.
• They see the revised $42 target as still offering upside from current levels, arguing that the stock already discounts a weaker Q3 EBITDA profile.
• Supportive views point to the potential for a more constructive regulatory backdrop on renewable volume obligation over time, which could re rate the shares.
• Some analysts emphasize that any improvement in small refinery exemption clarity could unlock higher visibility on cash flows, aiding valuation multiples.

Bearish Takeaways

• Bearish analysts focus on the projected Q3 EBITDA of $226M, which falls notably below consensus and raises concerns about execution against prior guidance.
• The expectation of a lowered full year outlook reinforces worries that growth assumptions embedded in prior targets were too optimistic.
• Ongoing uncertainty around renewable volume obligation and small refinery exemption allocation is seen as a key overhang, limiting near term multiple expansion.
• More cautious views suggest that until regulatory outcomes are finalized, investors may demand a discount to historic valuation ranges to compensate for risk.

What's in the News

• Darling Ingredients signed a definitive agreement with Tessenderlo Group to combine their collagen and gelatin businesses into a new joint company focused on collagen based health, wellness and nutrition products, with Darling holding an 85 percent stake (Key Developments).
• The new collagen and gelatin company is expected to generate about $1.5 billion in annual revenue and have roughly 200,000 metric tons of capacity across 22 facilities globally, with closing targeted for 2026 pending regulatory approvals (Key Developments).
• Management highlighted significant synergy potential and plans to expand the Nextida product portfolio, aiming to boost earnings over time through higher value, targeted health benefit offerings (Key Developments).
• Darling Ingredients reported that from June 29, 2025 to September 27, 2025, it repurchased zero shares, but has completed 11.6 million shares of total repurchases, or about 7.17 percent of shares outstanding, for $516.75 million under its long running buyback program (Key Developments).

Valuation Changes

• Fair Value, unchanged at $47.00, indicates no revision to the long term intrinsic value estimate despite recent earnings adjustments.
• Discount Rate, unchanged at 6.956 percent, reflects a steady assumed risk profile in the valuation model.
• Revenue Growth, effectively unchanged at approximately 3.41 percent, suggests stable expectations for long term top line expansion.
• Net Profit Margin, remained essentially flat at about 9.17 percent, indicating no material change in projected long term profitability.
• Future P/E, held steady at roughly 15.13x, signaling consistent expectations for the multiple that investors may be willing to pay on forward earnings.