International Flavor & Fragrances Inc.
(IFF - Analyst Report
) has been surging lately due to strong demand both domestically and abroad. The company recently reported its 5th consecutive positive earnings surprise as revenue growth was strong around the globe.
Analysts continue to revise their estimates significantly higher as business improves. IFF is a Zacks #1 Rank (Strong Buy) stock.
International Flavor & Fragrances creates and manufactures flavor and fragrance compounds. The flavor compounds are sold to the food and beverage industries for use in consumer products, while fragrance compounds are sold to the cosmetics and household products industries.
The company is headquartered in New York City and has a market cap of $4.3 billion.
EPS Up 20%
IFF recently reported its results for the third quarter of 2010. Earnings per share was 98 cents, beating the Zacks Consensus Estimate by 12 cents. It was a 20% increase over the same quarter in 2009.
Total revenue increased 13% year-over-year as both the Flavor and Fragrances segments were strong. The Flavor segment saw 10% revenue growth, including 9% in North America and 11% in Asia. Fragrances increased 15%, including 25% growth in Latin America and 13% growth in Asia.
The company was able to control its input costs as the gross margin expanded from 40.6% of sales to 42.3%. This led to a 37% increase in operating profit year-over-year.
Estimates Moving Higher
Each of the 12 analysts that cover IFF revised their estimates for 2010 and 2011 higher following the strong quarter, leading to the Zacks #1 Rank (Strong Buy). The Price & Consensus Chart shows that estimates have been steadily moving up for several months now.
The Zacks Consensus Estimate for 2010 is $3.42, up from $3.24 30 days ago. This equates to 27% growth over 2009 EPS. The 2011 estimate is currently $3.76, representing 10% EPS growth. This estimate is up from $3.57 last month.
Since 2002, IFF has raised its dividend at a compound annual growth rate of 7.6%. Its payout ratio is a very manageable 32%.
The dividend yield is 2.1%.
Shares have risen nearly 30% since early July. Despite this, the stock trades at just 15.7x forward earnings, a slight discount to the industry average of 16.2x.
Return on equity is a stellar 31.5%, well above its peers at 18.2%.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.