On Thursday, BMO Capital adjusted its outlook on Darling Ingredients (NYSE:DAR), reducing the stock's price target from $60.00 to $57.00. The firm, however, reaffirmed its Outperform rating for the company's shares.
The revision follows Darling Ingredients' fourth quarter 2023 results, which reported an EBITDA of $351 million—a figure that surpassed the consensus estimate of $342 million.
The better-than-expected earnings were attributed to improved profits in core ingredients and reduced corporate expenses, although these were somewhat negated by weaker margins in the company's Diamond Green Diesel (DGD) segment.
The company also made the decision to withdraw its EBITDA guidance for 2024, which was previously set at $1.7 to $1.8 billion. According to BMO Capital, Darling Ingredients plans to provide an updated forecast with the release of its first quarter 2024 results, once there is greater clarity on the business outlook.
This unexpected move appears to have had a negative impact on investor sentiment, as suggested by the analyst's comments.
BMO Capital has consequently adjusted its estimates for Darling Ingredients, leading to the lowered price target. The firm anticipates that the stock may face limited growth in the near term due to the recent developments. Despite this, BMO Capital remains optimistic about the company's long-term prospects.
BMO analyst expressed confidence in the stock's potential, citing an attractive risk/reward ratio. They predict that Darling Ingredients' EBITDA for 2024 will likely exceed $1.5 billion, with a stronger earnings outlook commencing from 2025.
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