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Investing.com - TD Cowen has reiterated its Hold rating on Darling Ingredients (NYSE:DAR) while maintaining its $34.00 price target, according to a research note released Wednesday. The company, with a market capitalization of $4.9 billion, appears undervalued according to InvestingPro analysis, which identifies several positive factors including strong free cash flow yield and liquid assets exceeding short-term obligations.
The investment firm expects Darling’s Feed segment EBITDA to improve by approximately $35 million quarter-over-quarter, factoring in a 7 cents per pound increase in waste oil prices and a $5 million reduction in SG&A expenses. This projection falls short of TD Cowen’s previous estimate of a $50 million improvement.
The Food and Fuel segments, excluding Diamond Green Diesel (DGD), are anticipated to remain relatively flat quarter-over-quarter. The analysis indicates no immediate impact from Brazilian tariffs on the company’s Brazil segment, though these tariffs could potentially increase the cost of importing collagen into the United States in the future.
TD Cowen noted that DGD earned $0.14 per gallon in the previous quarter, excluding inventory adjustments. The firm has revised its third-quarter 2025 DGD EBITDA forecast from $0.13 per gallon to slightly below breakeven levels.
The research also projects a 25 million gallon volume decline quarter-over-quarter for DGD, incorporating zero volume at DGD1 due to economic factors and a 30-day turnaround at DGD3.
In other recent news, Darling Ingredients has announced an agreement to sell $125 million in production tax credits generated under the Inflation Reduction Act through its Diamond Green Diesel joint venture with Valero Energy Corporation. The proceeds from this sale are expected to be received later in 2025, contingent upon certain funding conditions. BofA Securities has initiated coverage on Darling Ingredients with a Buy rating and a price target of $45.00, suggesting a potential 40% upside. UBS has reiterated its Buy rating with a price target of $58.00, citing potential catalysts such as the tax credit sale to assist with the company’s deleveraging efforts.
Additionally, UBS has maintained its Buy rating despite lowering its earnings estimates for the rest of 2025. The firm adjusted its third-quarter EBITDA estimate to $256 million, below the Street consensus of $269 million, and reduced its fourth-quarter forecast to $284 million, compared to expectations of $304 million. In personnel changes, Darling Ingredients announced the departure of Matt Jansen, Chief Operating Officer – North America, who is eligible for severance benefits under his termination agreement. The company is actively marketing additional tax credits generated in 2025 for potential sale.
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