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Estimates continue to rise for International Flavors & Fragrances Inc. (IFF - Analyst Report) after the company posted strong Q1 results on May 10. It is a Zacks #2 Rank (Buy) stock.

Revenue and EPS both came in ahead of Zacks Consensus Estimates as IFF continues to benefit from the growing middle class in emerging markets.

Management is confident that it can hit its targets of 4-6% sales growth and double-digit earnings growth in 2011. Based on consensus estimates, analysts expect 16% EPS growth in 2011 and 11% growth in 2012.

The company also pays a dividend that yields 1.7%.

First Quarter Results

IFF reported its results for the first quarter of 2011 on May 10. The company reported EPS of $1.03, beating the Zacks Consensus Estimate of $0.94. It was a 21% increase over the same quarter in 2010.

Net sales rose 9% to $714.3 million, well ahead of the Zacks Consensus Estimate of $685.0 million. The increase was driven in large part by double-digit growth in the emerging markets.

The Flavors segment was particularly strong, increasing 13% year-over-year. Fragrances rose 6% over the same period.

The gross margin improved from 41.3% of sales to 41.6%. The company stated that it was able to offset higher input costs through "margin improvement initiatives".

Adjusted operating profit rose 22% due in large part to operating leverage. The operating margin expanded from 16.8% to 18.7% in the quarter.

Outlook

Management stated in its first quarter press release that it is confident that it can achieve its long-term targets of 4-6% local currency sales growth, 7-9% operating profit growth and 10%+ EPS growth for the full year 2011.

The 2011 Zacks Consensus Estimate of $3.91 is currently forecasting EPS growth of 16%. The 2012 consensus estimate is currently $4.34, representing 11% EPS growth.

Consensus estimates have been consistently moving higher over the last several months as the global economic recovery has gained traction. This can be seen in the company's Price & Consensus chart:

IFF: International Flavor & Fragrances Inc.

It is a Zacks #2 Rank (Buy) stock.

Dividend

IFF cut its dividend back in late 2000 but has been consistently raising it since, at an average annual rate of 6%. It currently yields 1.7%.

Valuation

Shares of IFF are up 16% since December 3 (Read the December 3 article here).

Valuation is still reasonable, however, due to a corresponding rise in earnings estimates. The stock trades at 16.3x forward earnings, a discount to the industry average of 17.1x.

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 $5.1 billion.

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Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

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