What happened
Shares of Darling Ingredients (NYSE: DAR) were pulling back today after the food and fuel supplier posted disappointing results in its fourth-quarter earnings report, as it missed estimates on the bottom line.
As of 10:58 a.m. ET, the stock was down 9.7%.
So what
Revenue in the fourth quarter jumped 28% to $1.76 billion with the help of acquisitions, beating estimates at $1.7 billion.
Ingredients for animal feed make up the majority of the company's business, and that segment grew revenue by 44% to $1.21 billion, though gross profit growth was slower.
The company made three acquisitions over the last year, including Op de Beeck, a leading organic waste processing company in Belgium; Valley Proteins, a food ingredient company with 18 rendering plants in the eastern half of the U.S.; and FASA Group, through which it gained exposure to the Brazilian rendering business.
As revenue grew, the company saw adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rise 35%. However, its bottom-line result was weaker than expected, as Darling finished the quarter with $0.96 in earnings per share, up slightly from $0.94 in the quarter a year ago and worse than estimates at $1.34.
A higher debt burden to fund the acquisitions led to increased interest expense, which ate into higher operating profits.
CEO Randall Stuewe said, "For the fifth consecutive year, Darling Ingredients has delivered superior earnings growth, driven by our market presence, vertical integration, and diverse but synergistic segments."
Now what
Looking ahead, the company said it expects continued growth and called for adjusted EBITDA of $1.80 billion to $1.85 billion in 2023, up from $1.54 billion in 2022.
However, investors seem understandably spooked by the nearly flat earnings-per-share growth in the fourth quarter, which bodes poorly for bottom-line growth in 2023. Given that, it's not surprising to see the stock sliding today.
10 stocks we like better than Darling Ingredients
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Darling Ingredients wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of February 8, 2023
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Darling Ingredients. The Motley Fool has a disclosure policy.
