We issued an updated research report on International Flavors & Fragrances Inc. (IFF Quick QuoteIFF - Free Report) on Dec 12, 2016. The company manufactures fragrance and flavor products for its customers in the U.S. and internationally. It currently has a market capitalization of approximately $10 billion.

Year to date, International Flavors & Fragrances’ shares yielded returns of 4.7%, outperforming the return of 4% generated by the Zacks categorized Chemicals Specialty industry.

We believe the company is well positioned to benefit from its new business wins, diversified product portfolio and growing demand for flavors and fragrances worldwide. Over 2016–2020, it hopes to achieve around 4–6% expansion in local currency sales, about 7–9% operating profit growth and over 10% rise in earnings per share. Investment in research and development as well as rewarding shareholders remains a priority for the company.

In addition, International Flavors & Fragrances’ acquisition of meaningful businesses for expansion has proved to be a boon. In Oct 2016, the company acquired David Michael & Company, Incorporated, thereby boosting its customer base in the fast-growing middle-markets. The assets are likely to generate incremental revenue of $85 million in 2017. In Nov 2016, the company agreed to acquire Fragrance Resources. These assets are anticipated to generate incremental revenues of $75 million in 2017 as well as modestly boost earnings in the year. For 2016, the company anticipates acquired assets to contribute roughly 2% to sales growth and 1.5% to both operating profit and earnings per share growth.    

For 2016, International Flavors & Fragrances expects currency-neutral net sales to grow roughly 4−5% versus 3.5−4.5% expected earlier; while adjusted earnings per share will likely increase in the 5−6% range.

We believe that the positive impacts of the above-mentioned tailwinds are partially offset by the adversaries of near-term headwinds. International Flavors & Fragrances is exposed to risks arising from adverse currency movements, geopolitical issues in some foreign countries and stiff competition. For 2016, adverse foreign currency movements are likely to negatively impact sales by 1.5%, while operating profit and earnings per share by 2%.

Also, majority of International Flavors & Fragrances’ raw materials, including essential oils, extracts and concentrates derived from fruits, vegetables, flowers, woods and other botanical and animal products, raw fruits and organic chemicals are sourced from various countries across the globe. Any disruptions in the supply or quality of ingredients or rising prices of ingredients purchased could reduce profitability.

International Flavors & Fragrances currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the chemical industry include NewMarket Corporation (NEU Quick QuoteNEU - Free Report) , BioAmber Inc. and H.B. Fuller Company (FUL Quick QuoteFUL - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

NewMarket Corporation witnessed upward earnings estimate revisions for 2016 and 2017 over the past 30 days. Also, the company has an average positive earnings surprise of 23.16%.

BioAmber Inc.’s bottom-line estimates for 2016 and 2017 represent year-over-year growth of 59.4% and 30.2%, respectively.
 
H.B. Fuller Company’s earnings estimates for fiscal 2017 represent year-over-year growth of 11.6%.

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