Darling Ingredients’ 90% Rally: Sustainable Aviation Fuel Pivot Drives Massive Outperformance

The Momentum Story: From Waste to Wealth

Darling Ingredients (DAR) has transformed into one of the market's most compelling momentum stories, delivering a 6-month excess return of +83.5% against the S&P 500. The stock’s trajectory has been nothing short of vertical, with a 3-month return of +44.8% and a year-to-date gain of +67.4%. While the broader market has faced volatility—evidenced by the S&P 500’s 1.1% drop today—Darling remained resilient, closing flat at $60.25. This relative strength is a hallmark of institutional accumulation, further supported by a remarkably bullish Put/Call ratio of 0.36, indicating that options traders are heavily positioned for further upside.

Technically, the stock is in a prime position. It recently triggered a "Golden Cross," with its 50-day moving average crossing above the 200-day average, a signal that often precedes sustained long-term rallies. Despite the nearly 90% surge over the last half-year, the Relative Strength Index (RSI) sits at a neutral 43.9, suggesting the stock is neither overbought nor overextended at current levels. Currently trading at 87.3% of its 52-week range, Darling is within striking distance of its yearly high of $64.90.

The Fundamental Engine: The SAF Inflection Point

The primary catalyst for this re-rating is the Diamond Green Diesel (DGD) joint venture with Valero Energy. In late 2024, the JV completed a massive expansion at its Port Arthur, Texas, facility, enabling it to produce 235 million gallons of neat Sustainable Aviation Fuel (SAF) annually. This pivot is critical; while renewable diesel margins have been historically volatile, SAF carries a significant pricing premium—often 4x to 6x the price of traditional jet fuel—driven by aggressive decarbonization mandates from global airlines.

Fundamental data supports the price action. In the fourth quarter of 2025, Darling reported adjusted EBITDA of $336 million, crushing the consensus estimate of $267 million. The Feed segment was a standout performer, contributing $193 million against expectations of $165 million. This earnings power has forced Wall Street to play catch-up. While the broad consensus target remains near the current price at $60.50, leading analysts have recently issued much more aggressive targets, including UBS at $78.00 and Baird at $75.00, citing clarity on Renewable Volume Obligations (RVOs) and improving fat-to-fuel spreads.

Risks and the Bear Case

No momentum story is without its hurdles. Darling’s valuation has expanded significantly, with its trailing P/E ratio reaching approximately 150x, a level that some value-oriented analysts find difficult to justify. Furthermore, the regulatory landscape remains a double-edged sword. The 45Z clean fuel production tax credit is set to decline from $1.75 to $1.00 per gallon in 2026, which could pressure margins if feedstock costs for used cooking oil and animal fats rise.

Insider activity also warrants a cautious eye; CEO Randall Stuewe sold 20,000 shares in March 2026. While this represented less than 2% of his total stake, it serves as a reminder that the stock is trading near its multi-year ceiling. Additionally, with institutional ownership at a staggering 106.3%, the stock is a "crowded trade," making it susceptible to sharp pullbacks if the upcoming Q1 2026 earnings report on April 30 fails to meet the high bar set by recent performance.

Forward Outlook

As we look toward the April 30 earnings release, the market is focused on whether Darling can sustain its margin expansion. Analysts are forecasting Q1 EPS of $0.56 on revenue of $1.56 billion. If the company can demonstrate that its SAF production is scaling profitably and that its specialty ingredients venture, Nextida, is gaining traction in the health and wellness sector, the stock could easily breach its 52-week high. For informational purposes only, the current technical setup and fundamental tailwinds suggest that Darling Ingredients remains one of the most potent decarbonization plays in the equity market today.