Raymond James reiterates Strong Buy on Darling Ingredients stock

Darling Ingredients (DAR) reported a significant miss for Q2 2025, with earnings per share of $0.08 and revenue of $1.19 billion falling well short of analyst expectations of $0.30 and $1.49 billion, respectively. Despite these disappointing results, Raymond James reiterated its "Strong Buy" rating and $60 price target, emphasizing the company's long-term strategic advantages in sustainable fuels via its Diamond Green Diesel joint venture and perceived undervaluation. The mixed performance, including stronger-than-modeled DGD JV results, has drawn investor attention, though no analyst rating changes have been reported.

Analysis

Darling Ingredients (DAR) presents a conflicting investment profile, marked by a severe recent performance shortfall against a bullish long-term strategic outlook. The company reported a significant miss for its second quarter of 2025, with earnings per share of $0.08 and revenue of $1.19 billion, falling substantially below analyst forecasts of $0.30 and $1.49 billion, respectively. This underperformance was driven by weakness in the Feed segment, attributed to lighter pricing and operational lag effects. In contrast, Raymond James has reiterated a "Strong Buy" rating with a $60.00 price target, anchoring its thesis on the company's long-term position in sustainable fuels. The firm highlights the Diamond Green Diesel (DGD) joint venture's first-mover advantage and the strategic value of integrating legacy business lines. While the DGD venture reported stronger-than-modeled results, these were aided by inventory adjustments and partially offset by LIFO headwinds that may be under-appreciated by the market. Despite the earnings miss, the company maintains a healthy current ratio of 1.4, suggesting underlying operational stability.

Key Decisions for Investors

• Investors should weigh the significant near-term execution risk, evidenced by the Q2 earnings miss and Feed segment weakness, against the long-term potential of the sustainable fuels strategy championed by analysts.
• Monitor the performance of the Diamond Green Diesel joint venture closely, specifically its ability to maintain its first-mover advantage and navigate headwinds beyond temporary inventory adjustments.
• Given the stark contrast between current results and the $60 analyst price target, it is crucial to assess whether the company's valuation adequately reflects the challenges in its legacy segments or if the market is overly focused on the long-term renewables narrative.