Darling Ingredients Inc. Earnings Beat on Diamond Green Diesel Strength

Darling Ingredients just served up impressive fourth-quarter results, and the market seems to be satisfied.

Shares of the rendering and sustainable bio-ingredients specialist climbed 5% in Wednesday's after-hours trading, when it announced that net sales in the fourth quarter more than doubled year over year to $1 billion. For that, investors can primarily thank Darling'sacquisition of Vion Ingredients in the first quarter of 2014. GAAP net income rose to $69.9 million, or $0.42 per diluted share. And on an adjusted basis, net income was $1.20 per diluted share. Analysts, on average, were only expecting adjusted earnings of $0.21 per share on sales of $956.9 million.

Breaking it downThis performance also came amid continued headwinds in Q4 from lower global prices of Darling's finished products, and the negative effects of the strong U.S. dollar on Darling's substantial international business.

At the same time, Darling CEO Randall Stuewe elaborated: "The global price resetting appears to have stabilized with raw material values adjusting and prices for most proteins recovering to meet the increased demand in both the feed and pet food sectors. Fat and used cooking oil finished product prices continued their decline as a result of larger global grain supplies, lower crude oil values, and a non-defined Renewable Fuel Standard for 2014 or 2015."

Net sales from Darling's Feed ingredients segment climbed 35% year over year to $606 million, resulting in a modest 4% increase in operating income to $33.6 million. Again, however, those gains are mostly due to last year's acquisition. Revenue from its Food Ingredients segment -- which had no prior-year comparison, as it cameentirelyfrom Vion -- was $322 million, and generated operating income of $13.7 million.

The taxman givethBut perhaps most notable, Stuewe stated, "Diamond Green Diesel delivered a tremendous quarter, and as anticipated we benefited from the reinstatement of the biodiesel blender's tax credit."

Sales from Darling's Fuel Ingredients segment were roughly $72.2 million, which resulted in operating income of $10.9 million. But that also excludes the DGD joint venture, with which Fuel Ingredients operating income skyrocketed to $70 million in Q4 on the heels of the tax credit.

For perspective, last quarter Darling's North American results were hurt by uncertainty revolving around both U.S.-mandated renewal fuel obligations, and the then-possible extension of the blenders tax credit, which originally expired on Dec. 21, 2013. As Stuewe suggested, Darling announced this past December that it expected to benefit from the recent signing into law of the Tax Increase Prevention Act of 2014, which retroactively reinstated the credit.

At the time -- and keeping in mind that the DGD joint venture with Valerohas not yet distributed any earnings to its venture partners -- Darling also said DGD would use a portion of the expected $65 million in proceeds to retire debt, with the excess to be distributed as a dividend to the joint venture partners.Either way, Darling Ingredients is obviously happy to have the biodiesel tax credit back, as it makes its DGD joint venture all that much more lucrative.

Also of note under Fuel Ingredients, Darling says its new bio-phosphate facility in Son, Netherlands, was in full production during the quarter, and its disposal rendering operations saw increased demand as well.

Finally, remember Darling typically doesn't offer specific quarterly guidance, so it's hard to blame Wall Street for being so far off base. But Darling managementisholding its usual quarterly conference call with analysts on Thursday morning, so listen for the team to provide more general insights regarding both the direction of the business and pertinent items that might affect operating results in the near future.

But based on what we've been given so far, Darling investors can rest easy knowing the company is not only enjoying the blenders tax credit again, but is also looking forward to a stabilized market for its core business.

The article Darling Ingredients Inc. Earnings Beat on Diamond Green Diesel Strength originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Darling Ingredients. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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