Darling Ingredients Q3 2026 Earnings: DGD Drives Profit Recovery and Deleveraging

Darling Ingredients (NYSE: DAR) reported fiscal Q3 2026 net sales of $1.79 billion, up approximately 14.5% from $1.56 billion a year earlier, while GAAP diluted EPS increased to $1.67 from $0.12. The largest earnings driver was Diamond Green Diesel (DGD), whose turnaround helped lift combined adjusted EBITDA to $514.3 million and supported an approximately $420 million reduction in net debt.

Core Earnings Data

Revenue growth came from both customer groups. Third-party net sales rose to $1.36 billion from $1.22 billion, while related-party sales to DGD increased to $432.0 million from $342.1 million. Gross margin expanded by approximately 1.9 percentage points, led primarily by improvement in Feed Ingredients.

The increase in GAAP profit was larger than the revenue gain. Darling recognized $165.6 million of equity income from DGD, compared with a $45.8 million loss in the prior-year quarter, and recorded a $63.5 million gain on the sale of businesses. At the same time, adjusted EBITDA before adding Darling’s share of DGD improved by approximately 25.1%, showing that the core operations also contributed to the earnings increase.

Gross margin is calculated from net sales less the reported cost of sales and operating expenses, which excludes depreciation and amortization. Combined adjusted EBITDA adds Darling’s 50% share of DGD adjusted EBITDA to the company’s adjusted EBITDA and is a non-GAAP measure.

Business and Segment Performance

Feed Ingredients produced the largest improvement among Darling’s consolidated operating segments. Its sales increased approximately 17.3%, while segment adjusted EBITDA rose approximately 42.4%. Food Ingredients delivered more modest growth, and Fuel Ingredients’ standalone adjusted EBITDA was slightly lower despite higher sales.

For its three months ended September 30, 2026, DGD sold or shipped 314.9 million gallons of renewable fuels. Darling calculated DGD adjusted EBITDA at $1.30 per gallon on a standalone basis.

Higher corporate costs partially offset the segment gains. The corporate adjusted EBITDA loss widened to $35.2 million from $22.3 million, while consolidated selling, general and administrative expenses increased to $166.9 million from $139.6 million.

DGD’s Turnaround Converted Profit Growth Into Deleveraging

DGD affected both reported earnings and cash available to Darling. The joint venture contributed $204.2 million to Darling’s combined adjusted EBITDA and $165.6 million of equity income, reversing negative contributions in the prior-year quarter.

Darling also received $171.0 million in cash distributions from DGD, consisting of approximately $33.4 million in dividends and $137.6 million from Production Tax Credit sales. These distributions were actual cash receipts and were separate from the equity-income and adjusted-EBITDA measures. Management said the DGD cash, together with cash generated by global operations, helped the company reduce net debt by approximately $420 million during the quarter.

Balance Sheet and Capital Allocation

Darling ended the quarter with $121.7 million in cash and cash equivalents, approximately $3.49 billion of total debt, and $3.37 billion of net debt. The preliminary leverage ratio was 1.7 times, and the company had $1.73 billion available under its committed revolving credit agreement.

Capital allocation included $75.9 million of share repurchases during Q3, bringing year-to-date repurchases to $149.4 million. Year-to-date capital expenditures were $343.5 million, compared with the company’s approximately $450 million estimate for the full fiscal year.

Guidance

Darling reaffirmed its fiscal 2026 combined adjusted EBITDA range and set year-end balance-sheet targets that call for additional deleveraging from the Q3 level. With nine-month combined adjusted EBITDA of $1.66 billion, the full-year range implies approximately $537 million to $637 million for Q4.

Reaching the net-debt target from the Q3 balance would require at least approximately $367 million of additional reduction by fiscal year-end.

Risks Investors Need to Watch

• Dependence on DGD performance: Darling’s share of DGD adjusted EBITDA moved from a $2.9 million loss to a $204.2 million contribution. That swing was central to the increase in combined adjusted EBITDA, making future results sensitive to DGD’s profitability.
• Tax-credit-related cash flows: Approximately $137.6 million of the quarter’s DGD cash distributions came from Production Tax Credit sales. Changes in the timing or scale of these proceeds could affect cash available for debt reduction.
• Nonrecurring support for GAAP profit: The quarter included a $63.5 million gain on the sale of businesses. That gain helped reported net income but does not represent recurring operating performance.
• Higher corporate expenses and execution of debt targets: SG&A increased, and the corporate adjusted EBITDA loss widened. Darling must also balance its remaining capital spending and shareholder returns with the additional debt reduction needed to reach its year-end target.

Summary

Darling Ingredients’ Q3 2026 results combined stronger core performance, led by Feed Ingredients, with a major recovery at DGD. DGD’s earnings and cash distributions accelerated deleveraging, while the company maintained its full-year combined adjusted EBITDA guidance. The main issues to monitor are the durability of DGD’s contribution, continued expense control, and whether fourth-quarter cash generation is sufficient to meet the company’s year-end net-debt and leverage targets.