Darling Ingredients (NYSE:DAR) announced first-quarter 2017 results on Tuesday after the market closed, highlighting accelerated revenue growth thanks to improving industry conditions. But with shares down around 9% in after-hours trading as of this writing -- albeit after setting a fresh 52-week high earlier this week thanks to sustained momentum created by its strong fourth-quarter report in late February -- it seems the market isn't impressed with what the rendering and biodiesel specialist had to say.

Let's dig deeper, then, to see what drove Darling's business as it kicked off the new year and what investors should expect from the company going forward.

Hand holding a diesel fuel pump

IMAGE SOURCE: GETTY IMAGES.

Darling Ingredients results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Growth

Revenue

$880.1 million

$779.6 million

12.9%

Net income attributable to Darling

$5.8 million

$1.1 million

427.3%

Net income per diluted share

$0.04

$0.01

300%

Data source: Darling Ingredients.

What happened with Darling Ingredients this quarter?

  • Darling Ingredients doesn't provide specific quarterly financial guidance. So for perspective -- and though we don't usually place much weight on Wall Street's demands -- consensus estimates predicted higher earnings of $0.07 per share on lower revenue of $829.3 million.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 3.6% to $102.5 million.
  • Feed Ingredients revenue increased 16.1% year over year to $552.6 million. Feed segment operating income grew 122% to $30.8 million, driven by cost control measures and higher finished product prices in a strong global fats market.
  • Food Ingredients revenue climbed 8% to $267.8 million. Segment operating income declined 35.4% to $14.1 million due to an oversupply of hide gelatin and lower import tariff regulations in South America.
  • Fuel Ingredients revenue -- excluding Darling's Diamond Green Diesel (DGD) joint venture with Valero (NYSE: VLO) -- increased 7.4% to $59.7 million. Fuel Ingredients operating income declined 42.7% to $3.5 million, primarily due to the absence of the blenders tax credit, which was recognized in last year's first quarter.
  • Partner dividends of $25 million each were issued to both Darling and Valero during the quarter for Diamond Green Diesel. DGD's planned expansion to 275 million gallons of annual production (an increase of over 70%) is on schedule for a second-quarter 2018 completion.

What management had to say 

Darling Ingredients CEO Randall Stuewe elaborated:

We capitalized on an improved environment with our first quarter results reflecting solid execution across our global platform leveraged by sequentially consistent and improved performance in our Feed and Food segments. Sequentially, Fuel segment results reflect the lack of the blenders tax credit and one-time settlements received last quarter. Diamond Green Diesel completed its second maintenance turnaround and issued a partner dividend of $25 million each. Our planned expansion of Diamond Green Diesel is progressing well and we continue to focus on growing our global platform while improving efficiencies and increasing capital returns. We're off to a good start in 2017.

Looking forward

This was a solid quarter in terms of Darling Ingredients' top-line growth, even if earnings were selectively held back by a combination of tax credit timing and geography-specific issues in Darling's food business. In the end, what matters most is that Darling's key business initiatives remain intact. Though the market's initial negative response to the quarter might not indicate as much, I think investors should be pleased as long as Darling Ingredients continues to successfully pursue those plans.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Darling Ingredients. The Motley Fool has a disclosure policy.