Analyzing Eminence Capital's Key Positions in 4Q14 (Part 3 of 15)
Eminence Capital and Darling Ingredients
During the fourth quarter of 2014, Eminence Capital opened a position in Darling Ingredients (DAR). The fund held 8,262,343 shares of DAR. Darling Ingredients accounted for 2.18% of the fund’s 4Q14 portfolio.
About Darling Ingredients
Darling Ingredients (formerly Darling International) develops and produces sustainable, natural ingredients from edible and inedible bionutrients. The Irving, Texas-based company collects and transforms all aspects of the animal by-product stream into specialty ingredients.
Darling Ingredients operates in three segments:
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Food Ingredients: gelatin, casings, functional proteins, food grade fats, heparin, and bone china
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Feed Ingredients: proteins, fats, bakery feeds, organic fertilizers, plasmas, and hides
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Fuel Ingredients: renewable fuels, biofuels, green gas, and green electricity
Darling added the Food Ingredients segment after having acquired VION Ingredients in January 2014.
DAR provides its ingredients to a diversified, global base of customers from the food, pharmaceutical, technical, pet food, feed, fuel, fertilizer, and bioenergy industries.
Solid fourth-quarter results
For the fourth quarter of 2014, Darling’s revenue was $1 billion compared to $447.9 million in 4Q13. The acquisition of VION primarily drove this growth. Operating income was $39.7 million in 4Q14 compared to $18.5 million in 4Q13.
The Food Ingredients segment continued to generate strong results in 4Q14. The Feed Ingredients segment felt the pressure of low prices for its finished goods due to falling crude oil prices.
The Fuel Ingredients segment witnessed the benefits of the new biodiesel tax credit during the fourth quarter. A significant portion of this credit was available to Diamond Green Diesel, a joint venture with Valero Energy Corporation (VLO). Foreign exchange—mainly the declining euro—impacted 4Q14 results by $4.4 million.
For 4Q14, DAR’s net income was $69.9 million or $0.42 per diluted share compared to $22.5 million or $0.18 per diluted share in 4Q13. This increase was mainly due to the “inclusion of the blender’s tax credit from Diamond Green Diesel and newly acquired operations.”
Darling Ingredients has a dividend yield of 0%. The company’s peers Tyson Foods (TSN) and Ingredion (INGR) have dividend yields of 0.80% and 2.03%, respectively.
You can gain exposure to DAR by investing in the iShares Russell 2000 Value ETF (IWN) and the Vanguard S&P Small-Cap 600 Value ETF (VIOV). DAR accounts for 0.2270% and 0.86% of IWN and VIOV, respectively.