Shares of Darling Ingredients (DAR) plummeted 5.04% in Friday's trading session following the release of disappointing second-quarter earnings and subsequent analyst downgrades. The company, which specializes in turning animal by-products and food waste into valuable ingredients and renewable fuels, faced significant headwinds in its renewable fuels segment.

Darling Ingredients reported Q2 earnings per share (GAAP) of $0.08, missing analyst estimates by 66.7%. While revenue slightly beat expectations at $1.5 billion, the company's profitability took a major hit. The steep shortfall in profit was primarily driven by weaker results at the company's renewable fuels joint venture, Diamond Green Diesel (DGD). The renewable fuels business saw a 44% drop in adjusted EBITDA compared to the same quarter last year, earning only $0.36 per gallon in EBITDA due to lower regulatory credits and changing U.S. policy for renewable fuels.

In response to the weak performance, Darling Ingredients cut its full-year FY2025 combined adjusted EBITDA guidance by over $200 million, now projecting $1.05 to $1.10 billion, down from the earlier forecast of $1.25 to $1.30 billion. This revision reflects ongoing uncertainty around U.S. renewable fuel policy and slow recovery in the market for regulatory credits. Following the earnings release, several analysts downgraded the stock, including Baird analyst Ben Kallo, who lowered the rating to Neutral from Outperform and reduced the price target to $36 from $40. The series of negative news has put significant pressure on Darling Ingredients' stock price, leading to today's sharp decline.