Can Renewable Fuel Policy Keep DAR's DGD Earnings Strong Through 2027?

DAR's DGD Earnings Jumped in the Second Quarter

Darling's share of DGD adjusted EBITDA reached $389.2 million in the second quarter of 2026, up from $42.6 million a year earlier. Production increased to 355.9 million gallons, while EBITDA per gallon sold climbed to $2.23 from 34 cents.

The improvement gives DGD a much larger role in Darling's earnings profile. Valero Energy Corporation VLO, Darling's 50/50 DGD partner, reports the venture within its Renewable Diesel segment and says DGD has about 1.2 billion gallons of annual production capacity.

Darling Sees RIN Tightness Supporting DGD Margins

Management expects continued tightness in Renewable Identification Numbers (RINs) to remain supportive of renewable-fuel production and DGD margins. Higher RIN values, diesel prices and production tax credits all contributed to the second-quarter improvement.

Darling also believes the current Renewable Volume Obligation is appropriately sized when production increases, imports, small-refinery exemptions and normal deficit carryforwards are considered. Still, the company has said RINs need to remain supportive to keep incentivizing production and fulfill the mandate.

DAR's Production Outlook Keeps Scale in Focus

DGD is expected to produce about 335 million gallons in the third quarter. Management views margins through 2027 as attractive under the current mandate, so maintaining high utilization remains an important part of the earnings opportunity.

Phillips 66 PSX offers another renewable-fuels reference point. Its Rodeo Renewable Energy Complex has capacity of about 800 million gallons per year, and the company's second-quarter 2026 Renewable Fuels results benefited partly from higher regulatory credit pricing and renewable-fuels production.

Darling's DGD Upside Still Depends on Market Inputs

The second quarter included about $50.5 million of favorable International Emergency Economic Powers Act tariff recovery at the DGD entity level. That benefit means the quarter should not be treated as a clean recurring run rate even though the underlying market environment improved substantially.

DGD profitability also remains exposed to renewable-fuel pricing, feedstock costs and broader market conditions. A softer RIN market, weaker diesel values or higher feedstock costs could narrow margins even if the policy framework continues supporting industry production.

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DAR's Ratings Back Growth but Flag Momentum

Policy support strengthens the DGD earnings case, but sustaining the second-quarter pace will require more than the Renewable Volume Obligation. RIN support, diesel values and feedstock economics need to remain favorable, while the tariff recovery makes the latest quarter an imperfect benchmark for future profitability.

DAR currently carries a Zacks Rank #1 (Strong Buy), along with a Growth Score of A, VGM Score of A and Value Score of B. Its Momentum Score of D is the weaker signal. The mix favors the earnings-growth and broader style case, but the momentum reading supports a measured view of near-term price timing. You can see the complete list of today’s Zacks #1 Rank stocks here.

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