NEW YORK (TheStreet) -- Analysts at BMO Capital Markets reduced their earnings estimates on Darling Ingredients (DAR) to $0.41 per share from $0.76 in 2015 and to $0.96 per share from $1.06 in 2016. The firm reiterated its "outperform" rating and $22 price target.
Analysts said the company's first quarter earnings of 2 cents per share fell short of their below-consensus estimate, largely reflecting weaker-than-expected DGD performance and greater F/X headwind.
Additionally, "DAR has initiated an aggressive cost savings initiative and began to institute additional charges/raw material payment reductions in an effort to restore margins in its rendering business in light of the lower rendering prices," they said.
Despite the earnings reduction, analysts said that DAR remains a compelling investment opportunity as fundamentals reached an inflection points this quarter and positive legislative decisions are likely on the horizon.
In Monday's late morning trading, shares of Darling Ingredients fell 1.79% $15.36.
Darling Ingredients develops, produces, and sells natural ingredients from edible and inedible bio-nutrients worldwide.
TheStreet Ratings team rates DARLING INGREDIENTS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DARLING INGREDIENTS INC (DAR) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 100.2% when compared to the same quarter one year prior, rising from -$52.80 million to $0.11 million.
- DARLING INGREDIENTS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DARLING INGREDIENTS INC reported lower earnings of $0.39 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.39).
- DAR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 27.86%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for DARLING INGREDIENTS INC is rather low; currently it is at 21.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.01% trails that of the industry average.
- You can view the full analysis from the report here: DAR Ratings Report