International Flavors & Fragrances Inc. (IFF) posted good results in the first quarter of 2011 compared with a year-ago comparable quarter and also surpassed the Zacks Consensus Estimate.
Earnings Review
International Flavors & Fragrances’ first quarter adjusted earnings per share soared 21% year over year to $1.03 compared with 85 cents in the year-ago quarter. Results were also above the Zacks Consensus Estimate of 94 cents.
Net sales in the first quarter were $714 million, up 9% year over year and above the Zacks Consensus Estimate of $686 million.
Detailed discussion on the earnings release can be found here: IFF Beats, Guides High
Agreement of Analysts
In the last 7 days, earnings estimates for International Flavors & Fragrances for the fiscal year 2011 were raised by 5 analysts and for 2012, increased by 6 analysts. Estimates for the second quarter of 2011 were raised by 2 analysts.
Estimates were also negatively revised for the fiscal year 2011 by 2 analysts and by 4 analysts for the second quarter of 2011.
Positive revision incorporates the company’s long-term growth prospects evident from increasing exposure to emerging markets. Results are expected to be influenced by healthy local currency sales and forex impacts. Moreover, rising consumer spending, strong product portfolio, and new business wins remain encouraging attributes.
Near-term results can be subject to negative impact from rising input costs, which in turn can impact earnings growth in the quarters ahead. Besides, a constant threat from rising competition from its peers like Danisco A/S, Firmenich SA, and Givaudan SA looms large for the company.
Magnitude of Estimate Revisions
Earnings per share estimate for fiscal year 2011, in the last 7 days, increased to $3.91 from $3.88 and represented a year-over-year growth of 16.05%. Estimate for 2012, inched up six cents to $4.34 per share, representing a year-over-year growth of 11.07%.
Mixed sentiments for the second quarter, however, led to a 2 cent decline in earnings estimate to 97 cents per share at current levels. This represents a 14.47% increase year over year.
Our Take
International Flavors & Fragrances is one of the leading companies engaged in the creation and manufacturing of fragrance and flavor products in the United States and internationally. With the economy reviving from the global crisis, consumer spending appears to be accelerating, a positive driver for the flavors and fragrances industry.
We believe International Flavors & Fragrances stands in a favorable position to benefit from new business wins, tremendous geographical diversification, wide product lines, continuous accomplishments in research and intense consumer insight. Investments are also being made to capture markets in emerging countries. Moreover, the company’s efforts to reduce operating costs will enhance both its top line and margin levels in the quarters ahead.
However, the company’s expectation of a rise in input costs in 2011 remains a major cause of concern in the near term. Hence, we rate the stock Neutral.
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