The quarterly results for Darling Ingredients Inc. (NYSE:DAR) were released last week, making it a good time to revisit its performance. Revenues were US$851m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.61, an impressive 39% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the eight analysts covering Darling Ingredients are now predicting revenues of US$3.55b in 2021. If met, this would reflect a reasonable 4.1% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to nosedive 39% to US$1.87 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$3.55b and earnings per share (EPS) of US$1.71 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$50.90, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Darling Ingredients, with the most bullish analyst valuing it at US$84.00 and the most bearish at US$33.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Darling Ingredients is forecast to grow faster in the future than it has in the past, with revenues expected to grow 4.1%. If achieved, this would be a much better result than the 0.3% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 2.9% next year. So it looks like Darling Ingredients is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Darling Ingredients' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Darling Ingredients analysts - going out to 2024, and you can see them free on our platform here.
Plus, you should also learn about the 3 warning signs we've spotted with Darling Ingredients (including 1 which shouldn't be ignored) .
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