Shares of Darling International slumped 7 percent Wednesday following a downgrade by a BMO Capital Markets.
THE SPARK: Analyst Kenneth Zaslow lowered his rating on the company to "Market Perform" from "Outperform", saying the company's stock price reflects its current earnings value and he sees potential limits to its profitability ahead.
Darling, based in Irving, Texas, provides rendering, cooking oil and baker waste recycling and other services for the food industry.
Zaslow said lagging yellow grease prices could hamper the profitability of its rendering business. He also noted that lower cattle and hog supplies could lead to lower chicken production and chicken byproducts are one of the company's highest-margin products.
THE ANALYSIS: Zaslow lowered his 2012 earnings estimate to $1.17 from $1.21 and his 2013 estimate to $1.40 from $1.55. Analysts polled by FactSet were expecting the company to earn $1.21 for 2012 and $1.42 for 2013.
Zaslow also reduced his price target to $18 from $21.
SHARE ACTION: Darling International Inc. fell $1.14 to $16.41 by midday. The company's shares have fallen sharply since the beginning of October when it hit a year-long high of $18.50