It's Not Too Late to Buy Darling International

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

On March 5, I suggested it would be a great idea for investors to buy shares of Darling International (NYSE: DAR  ) before the company commissioned its Diamond Green Diesel joint venture with oil giant Valero Energy (NYSE: VLO  ) .

After all, as CEO Randall Stuewe pointed out at the time, had the two-years-in-the-making DGD plant been up and running that quarter, it would have generated net income of more than $41 million for both Valero and Darling. While that may seem like a drop in the bucket for Valero, which earned $2.1 billion last year, it would have boosted Darling's fourth-quarter net income by nearly a third.

In addition, the stock had fallen after the rendering specialist missed analysts' estimates with its fourth-quarter earnings report. However, those results were actually fairly solid, considering earnings per share fell just 2.4% year-over-year despite a 12% plunge in fat prices. 

As it stands, shares of Darling have risen almost 15% since then, outperforming the S&P 500's return over the same period by more than 8%:

DAR Total Return Price Chart

DAR Total Return Price data by YCharts

Shares of Darling were also up by as much as 5% during intraday trading Friday after the rendering specialist posted better-than-expected first quarter earnings.

As luck would have it, higher material volumes combined with a significant rebound in fat prices -- which were just 4% lower year over year -- helped Darling increase revenue 15% to $445.4 million. As a result, net income also rose 13.3% to $32.4 million for the quarter, or $0.27 per share. Both numbers beat analysts' estimates, which called for earnings of $0.26 per share on $410.8 million in sales.

You haven't missed the boat
Even better, this outperformance came in spite of the fact that construction isn't even finished on the Diamond Green Diesel plant. As promised last quarter, management reiterated that construction is nearing completion and the company is "at the early stages of a phased commissioning" with the project's tank farm, wastewater treatment, and pretreatment systems.

When all is said and done, Darling is anticipating "a late second quarter start-up and, barring any unforeseen issues, full production during the third quarter." As per his usual illustration, Stuewe also noted that had DGD been operating at planned capacity in the first quarter, it would have increased earnings per share by around $0.10, or more than 37%.

In the end, then, despite Darling's recent outperformance, I'm convinced that it's not too late to buy shares of this solidly profitable company whose core business remains essential to keeping our landfills free of billions of pounds of food waste every year. So buy now, Fools, and you can feel even better about your clean profits down the road.

More expert advice from The Motley Fool
The movement toward alternative energy is gaining momentum. One potential opportunity in this field is Clean Energy Fuels, which focuses its natural gas efforts primarily on trucking and fleets. It's poised to make a big impact on an essential industry. Learn everything you need to know about Clean Energy Fuels in The Motley Fool's premium research report on the company. Just click here now to claim your copy today.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2425202, ~/Articles/ArticleHandler.aspx, 9/25/2016 8:56:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:02 PM
DAR $13.08 Down -0.21 -1.58%
Darling Ingredient… CAPS Rating: ****
CLNE $4.30 Down -0.12 -2.71%
Clean Energy Fuels CAPS Rating: ****
VLO $55.67 Up +0.07 +0.13%
Valero Energy CAPS Rating: ****