Darling Ingredients Q2 Earnings Beat on DGD Strength, Sales Miss

Net sales increased 16.4% year over year to around $1,724 million but missed the consensus mark of $1,804 million. Diamond Green Diesel, or DGD, sold 348.8 million gallons at EBITDA of $2.23 per gallon.

DAR's Profit and Margin Picture

Gross profit increased 45.5% year over year to $503.4 million. The gross margin expanded 590 basis points to 29.2%, reflecting stronger fat and protein markets, favorable renewable-fuel economics and improved operational execution.

Selling, general and administrative expenses rose 9.3% to $151 million. Results also included $13.2 million of acquisition and integration costs and $3.9 million of restructuring and asset-impairment charges. Combined adjusted EBITDA surged to $741.7 million from $249.5 million in the year-ago quarter.

Operating income advanced to $555.2 million from $75.9 million. The increase included $350 million of equity income from DGD.

Darling's Segment Performance

Feed Ingredients net sales increased 22.7% to $1,149.5 million. Fat prices strengthened on robust biofuel-sector demand, while protein values benefited from increased U.S. poultry production and tight global fish-meal supplies. Segment adjusted EBITDA jumped 77% to $240.5 million, while raw material processed remained steady at 3.1 million metric tons.

Food Ingredients net sales rose 5.8% to $408.5 million. Growing collagen demand in the United States, Europe and Asia supported sales, along with broader uses across food, nutrition and health products. Segment adjusted EBITDA increased 55.1% to $108.5 million. The result included about $18 million of net IEEPA tariff recovery.

Fuel Ingredients net sales increased 4.6% to $166.1 million. Combined segment adjusted EBITDA climbed to $415.2 million from $61.3 million, primarily reflecting DGD’s performance. Darling’s share of DGD adjusted EBITDA was $389.2 million, up from $42.6 million. DGD produced 355.9 million gallons during the quarter.

DAR's Cash Flow and Leverage Position

DAR ended the quarter with $160.7 million in cash and cash equivalents, total debt of roughly $3.95 billion and net debt of $3.79 billion. During the second quarter of 2026, the company reduced net debt by $223 million and repurchased $73 million of common stock.

Revolver availability was $1.31 billion as of July 4, 2026. The preliminary leverage ratio under the company’s bank covenant improved to 2.3 times from 2.9 times at the beginning of 2026.

Darling's Portfolio Actions Support Strategy

During the quarter, Darling completed the acquisition of three rendering facilities from the Patense Group in Brazil for approximately $122 million. Management expects the assets to support its rendering network and contribute immediately to earnings.

Following the quarter, the company sold a majority of its non-core grease-trap environmental services business for approximately $90 million. Darling also signed an agreement to divest its CTH casings business, with the transaction expected to close by the end of 2026.

These actions reflect management’s focus on simplifying the portfolio, improving returns from existing infrastructure and allocating capital toward higher-value operations.

Darling's Outlook

For the third quarter of 2026, management expects core ingredients adjusted EBITDA of $325-$340 million. Excluding the second-quarter Food segment tariff recovery, the forecast indicates underlying performance generally consistent with the strong second-quarter level.

DGD is expected to produce approximately 335 million gallons in the third quarter. 

DAR expects to end 2026 with net debt at or below $3 billion and a bank leverage ratio below 2 times.

This Zacks Rank #2 (Buy) stock has rallied 28.8% over the past six months compared with the industry’s 0.1% growth.

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