DAR Q3 Earnings Surpass Estimates on Solid Feed Performance
Darling Ingredients Inc. DAR reported strong third-quarter 2026 results, supported by higher finished-product prices, resilient ingredient operations and improved renewable-fuel economics. Earnings were $1.67 per share, which rose from 12 cents a year ago and surpassed the Zacks Consensus Estimate of $1.64.
Net sales increased 14.5% year over year to $1,791.1 million, marginally exceeding the consensus mark of $1,789 million. Diamond Green Diesel, or DGD, sold 314.9 million gallons of renewable fuels, generating adjusted EBITDA of $1.30 per gallon.
Darling Ingredients Inc. Price, Consensus and EPS Surprise
Darling Ingredients Inc. price-consensus-eps-surprise-chart | Darling Ingredients Inc. Quote
DAR's Profitability and Margin Performance
Gross profit increased 23.4% year over year to $477.5 million. The gross margin expanded 200 basis points to 26.7% from 24.7%, reflecting improved profitability across the company's ingredient operations.
Depreciation and amortization expenses rose to $135.7 million from $124.1 million. Acquisition and integration costs declined to $5.8 million from $6.2 million. Results also included a $63.5 million gain on business sales.
Combined adjusted EBITDA surged 110% to $514.3 million from $244.9 million in the year-ago quarter. Global Ingredients adjusted EBITDA increased 25.1% to $310.1 million, while Darling's share of DGD adjusted EBITDA reached $204.2 million compared to a loss of $2.9 million.
Darling's Segment Performance
Feed Ingredients net sales increased 17.3% year over year to $1,206.7 million. Higher finished-product prices contributed $154.5 million to sales growth, while increased sales volumes added $36.8 million. Protein demand and pricing remained strong, although global fat prices retreated modestly during the quarter due to tariffs and biofuel industry downtime.
Segment adjusted EBITDA jumped 42.4% to $247.7 million from $174 million. Gross profit advanced to $333.9 million from $249.8 million, while the gross margin expanded 340 basis points to 27.7%. Raw material processed remained steady at 3.2 million metric tons. Results were affected by deferred profit accounting on related-party sales to DGD, which management expects to reverse in the fourth quarter.
Food Ingredients net sales rose 9.3% year over year to $415.8 million. Strong sales in China and growing collagen demand supported performance, while U.S. tariffs on Brazilian collagen and gelatin affected South American sales and volumes.
Segment adjusted EBITDA increased 3% to $73.8 million from $71.6 million. Gross profit improved to $110.3 million from $104.8 million, although the gross margin contracted 100 basis points to 26.5%. Darling expanded its Nextida portfolio with the launch of NxCogni, a targeted collagen product supporting cognitive health applications.
Fuel Ingredients net sales increased 9.3% year over year to $168.6 million. Combined segment adjusted EBITDA surged to $227.9 million from $21.6 million, primarily reflecting improved DGD profitability.
DGD produced 315.3 million gallons during the quarter compared with 231.5 million gallons a year earlier. Darling recorded $165.6 million in equity income from DGD against a loss of $45.8 million in the prior-year period. Performance was affected by sustainable aviation fuel shipment timing, a temporary hydrogen outage, feedstock cost lags and heating oil volatility. Management expects these impacts to reverse in the fourth quarter.
DAR's Balance Sheet and Capital Allocation
DAR ended the quarter with $121.7 million in cash and cash equivalents, total debt of approximately $3,488 million and net debt of $3,366.7 million. Net debt declined $420.3 million during the quarter, reflecting the company's continued focus on deleveraging.
The company received $171 million in cash from DGD, comprising $33.4 million in dividends and $137.6 million from production tax credit sales. It also repurchased $75.9 million of common stock, bringing year-to-date repurchases to $149.4 million.
Darling's Portfolio Optimization Initiatives
During the quarter, Darling completed the sale of a majority of its non-core grease-trap environmental services business for approximately $90 million. The transaction supports management's strategy of streamlining its operating portfolio.
The proposed joint venture with Tessenderlo continues to progress through the regulatory review process. Darling remains focused on improving operating returns through commercial optimization, operational efficiency and disciplined contract management.
DAR's Outlook Reflects Continued Momentum
DAR reaffirmed its fiscal 2026 combined adjusted EBITDA guidance of $2,200-$2,300 million, supported by strong ingredient operations and improved renewable-fuel economics.
Management expects DGD to produce approximately 325 million gallons in the fourth quarter. Strong renewable-fuel margins and improving market conditions are expected to support performance through the remainder of 2026 and into 2027.
Darling anticipates ending fiscal 2026 with net debt at or below $3,000 million and a bank leverage ratio below 1.5 times. Full-year capital expenditures are projected at approximately $450 million compared with $343.5 million incurred during the first nine months of 2026.
This Zacks Rank #3 (Hold) stock has surged 72.6% over the past year against the industry’s decline of 14.7%
Stocks to Consider
The Chefs' Warehouse, Inc. CHEF, a premier distributor of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF delivered a trailing four-quarter earnings surprise of 29.3%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for The Chefs' Warehouse’s current fiscal-year EPS implies growth of 35.3% from the year-ago figures.
Mama's Creations, Inc. MAMA, a prepared-food company focused on fresh, ready-to-eat and deli products, currently carries a Zacks Rank of 2. MAMA delivered a trailing four-quarter surprise of 121.7%, on average.
The Zacks Consensus Estimate for Mama's Creations’ current fiscal-year sales and EPS indicates respective increases of 30.3% and 66.7% from the year-ago period.
The J.M. Smucker Company SJM, a leading manufacturer and marketer of branded food, beverage, pet food and pet snack products, currently carries a Zacks Rank #2. SJM delivered a trailing four-quarter surprise of 13.8%, on average.
The Zacks Consensus Estimate for The J.M. Smucker’s current fiscal-year EPS implies growth of 17.1% from the year-ago figure.
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This article originally published on Zacks Investment Research (zacks.com).
