On Tuesday, Stifel, a financial services company, adjusted its outlook on Darling Ingredients (NYSE:DAR), a company specializing in turning animal by-products into useful ingredients. The price target for Darling Ingredients was lowered to $95.00 from the previous target of $120.00 Despite this reduction, Stifel has maintained a Buy rating for the company's stock.
The revision follows a thorough analysis of Darling's fourth quarter 2023 operating and financial results. Stifel's decision to reduce the price target by 21% to $95.00 per share from the earlier $120.00 per share is also influenced by changes in the long-term assumptions regarding D4 RIN prices, which are now set at $1.00, down from $1.50. This adjustment aims to better align with mid-cycle price expectations.
Additionally, Stifel has factored in the implications of the Clean Fuel Production Credit (CFPC), which is expected to replace the $1.00 Blender's Tax Credit (BTC) for Darling's renewable diesel and sustainable aviation fuel (RD/SAF) production starting in 2025. This change is anticipated to have a significant impact on the company's financials.
Despite the lowered target price, Stifel's commentary suggests confidence in the company's prospects. The firm believes that the market may be underestimating the value drivers for Darling Ingredients that are set to emerge in 2024. Concerns over potential near-term price and margin volatility are seen as overshadowing these future growth opportunities.
In conclusion, while the target price for Darling Ingredients has been revised downward, Stifel reaffirms its Buy rating and continues to feature the company on its Select List, indicating a favorable outlook on the stock's potential performance.
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