Darling Ingredients 2026 Q1 Earnings Outlook and Market Recovery Impact

Darling Ingredients (DAR) earnings outlook for Q1 2026 and the expected impact of market recovery on segment performance

1) What the company’s Q1 2026 results imply for its earnings outlook

Darling characterized the Q1 2026 operating environment as materially more favorable than prior periods, citing “expected EBITDA growth” and “sequential gross margin improvement” for the quarter. ¹ This framing matters because it links the outlook to (i) improved market conditions and (ii) execution/operational leverage rather than solely to one-off items.

Reported Q1 2026 performance (actual):

• Combined adjusted EBITDA: $406.8 million (global ingredients $255.6 million and Diamond Green Diesel (DGD) $151.2 million). ¹
• Versus prior periods, combined adjusted EBITDA was $407 million vs. $196 million in Q1 2025 and $336 million in Q4 2025. ²
• Gross margin: 26.1% in Q1 2026 vs. 22.6% in Q1 2025 and 25.1% in Q4 2025. ²

Segment EBITDA in Q1 2026:

• Core ingredients EBITDA (non-DGD): $256 million vs. $190 million in Q1 2025 and $278 million in Q4 2025. ²
• Feed segment: EBITDA $169 million vs. $111 million a year ago; gross margin improved to 25.3% vs. 20.3% in Q1 2025. ²
• Food segment: EBITDA $81 million vs. $71 million in Q1 2025; gross margin 28.9% vs. 29.3% a year ago. ²
• Fuel segment / DGD: DGD EBITDA $151 million with an explicitly noted LCM inventory valuation adjustment of $97 million at the DGD entity level; DGD also generated ~272 million gallons at an average EBITDA margin of $1.11/gallon. ²

Interpretation (outlook for Q1 2026):
The “outlook” for Q1 2026 is effectively demonstrated by the actual results: Darling is showing (a) sharply improved earnings power year-over-year and sequentially, ² (b) improving gross margins, ² and (c) broad-based strength across core ingredients and improved DGD economics once the RVO (renewable volume obligation) pathway became clearer. ³

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2) How management expects market recovery to flow through to segment performance

Darling’s commentary consistently links the recovery to higher cash/fuel/renewables dynamics in Q2 (and beyond), plus timing effects for feedstock and rendering markets that feed into the Feed segment.

A. Feed segment: recovery expected to show up through improved throughput, cost, and favorable fat pricing (with timing lag)

For Feed in Q1 2026, management cited:

• Operational excellence driving improvements in throughput, cost reduction, and product quality, translating into stronger gross margins. ¹
• Commercial agility shifting sales to higher-priced markets and mitigation of typical fat-price timing lag via disciplined risk management/spot sales. ¹
• Volume mix: “steady volumes” with “strong global poultry volumes offsetting stagnant North American cattle herd.” ¹

Management also explained the specific market timing mechanism:

• As Darling entered Q1, cash prices (FOB) for North American factories were “flat or lower than Q4,” but those prices “started to accelerate… in March” and that acceleration “will start to flow through very nicely in Q2.” ⁴
• They described ingredients guidance as “March extrapolated” with improvement, and noted fat prices were “exceedingly much higher than… Q1 cash prices,” implying Q2 progression (not uniform immediate impact). ⁴

Expected impact on Feed performance:

• The Feed segment should benefit from a recovery that is gradually realized as higher fat prices and better spreads propagate through pricing and sales timing. ⁴
• Management explicitly stated that tariff-related and pricing model adjustments in Brazil had been righted, and the “overall… ingredients business will have a stronger Q2,” with the conservative element of guidance tied to how much acceleration flows through. ⁴

Additionally, they summarized segment sensitivity:

• Feed is described as having the “most commodity exposure” and functioning largely as a “timing exercise” for how better proteins/fats across North America, Europe, and South America start flowing through—leading to “additional… margin expansion.” ⁵

B. Food segment: relatively steadier outlook; improvement tied to collagen demand and tariff easing

In Q1 2026, Food delivered growth in sales and modestly lower gross margin versus a year ago:

• Sales $405 million vs. $349 million in Q1 2025; Food gross margin 28.9% of sales vs. 29.3% a year ago. ²

Management framed longer-running drivers:

• Collagen and gelatin: “nice growth” in collagen, “particularly in Europe and Asia,” with YOY improvement reflecting customer demand and new applications; they linked demand themes to “food as medicine” and nutrition/protein positioning. ³
• They also cited that tariffs impacted specialty proteins but “markets are back open again with the lower tariffs,” contributing to “nice improvement in protein prices.” ⁶

Expected impact on Food performance:

• Management characterized Food as “stable” with “maybe a little bit of improvement,” tying upside to improved collagen/gelatin economics and demand momentum. ⁵
• They also emphasized that collagen/gelatin businesses are more predictable/less commodity-driven than Feed (while still benefiting from market recovery). ⁵

C. Fuel segment (DGD): recovery expected to strengthen through the year as the renewable margin turns the corner, but near-term earnings are hard to guide

For Q1 2026, management reported strong DGD EBITDA but noted timing/inventory valuation effects:

• DGD EBITDA $151 million includes a $97 million LCM inventory valuation adjustment and ~272 million gallons produced with $1.11/gallon average EBITDA margin. ²

They also discussed the fundamental recovery path:

• DGD is at an “inflection point” as “renewables margins turned a corner with finalization of the renewable volume obligation,” and with a “clear path forward,” Darling expects DGD’s results to “continue to strengthen throughout the year.” ³
• They further described that Q2 earnings power is likely greater than Q1, and Q3 even stronger, but emphasized they prefer not to guide tightly due to timing uncertainty of sales/feedstocks. ⁷

They also addressed why market recovery may not translate linearly into guidance:

• They were “gun shy” due to the last couple of years and highlighted difficulty in guiding because of timing (sales and feedstocks). ⁸
• Their Q2 timing discussion referenced that DGD output plans include ~320 million gallons in Q2. ⁷

Expected impact on Fuel segment performance:

• Directionally, DGD should benefit from the market recovery and RVO finalization, supporting stronger sequential/future earnings power through the year. ³
• However, quarter-to-quarter translation is affected by timing and potentially inventory/valuation effects (as evidenced in Q1). ²

D. Overall “market recovery” message: stronger ingredient and DGD earnings power, with conservative flow-through assumptions

Darling connected the broader recovery to improved execution and easing headwinds:

• They said headwinds have shifted and that operating environment results confirm “much more favorable” conditions, with “significantly improved earnings power” and “stronger cash flow potential.” ¹
• They specifically said the “results… confirm” expected EBITDA growth and sequential gross margin improvement in Q1. ¹

At the same time, they repeatedly used conservative language about how much of the acceleration flows into near quarters:

• In Q2 guidance commentary, management referenced conservative assumptions based on the still-unfolding price acceleration and the lag mechanics across regions/feedstocks. ⁴
• They also noted the guidance is conservative given uncertainty in flow-through timing. ⁹

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3) Bottom line answer to the question

• Q1 2026 earnings outlook (as reflected in actual results): Darling delivered $406.8 million combined adjusted EBITDA and improved gross margins to 26.1%, with strength in both core ingredients ($255.6 million global ingredients) and DGD ($151.2 million, including a large LCM adjustment). ¹²

• Market recovery’s expected impact on segments:

  • Feed is expected to improve as higher fat/cash prices accelerated in March and flow through with timing into Q2, driving “margin expansion” as global rendering pricing improves across continents. ⁴⁵
  • Food should remain stable to modestly improving, supported by ongoing collagen/gelatin demand growth and reduced tariff drag leading to better protein prices. ³⁶⁵
  • Fuel (DGD) should strengthen through the year following renewable margin normalization with the RVO finalization, though quarter-level earnings translation remains timing-sensitive (and near-term guidance is tempered accordingly). ³⁷⁸

• Forward visibility adjacent to Q1 (context for Q1 recovery): Darling set core ingredients EBITDA guidance for Q2 at $260 million to $275 million. ¹⁰ (This is not Q1 2026, but it shows how management is translating recovery assumptions into near-term outlook.)