Why Aug. 22 Is A Date To Watch For Darling Ingredients
Following Darling Ingredients Inc (NYSE: DAR)'s second-quarter results, Kansas City Capital, a division of Oppenheimer, said Aug. 22 could be an important date to watch for the company.
Darling Ingredients is engaged in the business of producing natural ingredients from edible and inedible bio-nutrients worldwide.
Analyst Tyson Bauer clarified that an antidumping decision is expected on Aug. 22, with the decision likely to impede Argentine biodiesel imports into the U.S. The analyst believes this to be a materially beneficial decision for U.S. producers and feedstock providers, with Darling Ingredients being both.
The analyst noted that the company benefited from a recent favorable decision in California regarding biodiesel and LCFS timeline.
"In our view, as the Street turns its focus toward the potential in 2018 and 2019 as regulatory decisions are finalized, the shares could pay forward for investors," the analyst said.
Accordingly, Kansas City Capital maintained its Outperform rating on the shares of the company and lifted its price target from $18 to $22.
See also: Are Biofuels Worse For The Environment Than Petrol-Based Fuels?
The firm noted that the company reported quarterly revenues above its expectations, with better than expected feed margins. However, weighed down by lower margins in food and fuel along with elevated SG&A expenses, the company posted EBITDA of $110 million, below the firm's estimate of $115 million.
However, the firm maintains its full-year reported EBITDA estimate of $452 million. Additionally, the firm said it is pleased with the DGD contribution despite not having the benefit of a tax credit during the quarter and improved current metrics.
Accordingly, the firm feels that the investment outlook from 2013 that drove shares as high as $24 is starting to piece itself back together, with more reliance on biofuels, cash flow of the core business and market leading positions in proteins and fats touted as positives.
While noting that total debt to EBITDA is below 3.6 times, the firm said the management is confident of achieving a comfortable level of leverage in six to nine months to warrant consideration of a dividend and more active share repurchase plan.
"We believe this could be a critical point in the public company's evolution by providing a consistent baseline annual investment return through debt paydown, dividend yield and share repurchases," the firm added.
Latest Ratings for DAR
Aug 2017 | Baird | Maintains | Outperform | |
Mar 2017 | Baird | Initiates Coverage On | Outperform | |
Aug 2016 | JP Morgan | Maintains | Overweight |
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