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Why Is International Flavors (IFF) Up 4% Since the Last Earnings Report?
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It has been about a month since the last earnings report for International Flavors & Fragrances, Inc. (IFF - Free Report) . Shares have added nearly 4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Fourth-Quarter 2016 Highlights
International Flavors & Fragrances reported better-than-expected results for fourth-quarter 2016. The company's adjusted earnings came in at $1.22 per share, surpassing the Zacks Consensus Estimate of $1.16 by 5.2%. Also, the bottom line was 16.2% above the year-ago tally of $1.05.
Excluding the impact of foreign currency movements, the company's adjusted earnings increased nearly 6% year over year. The bottom-line growth came on the back of volume growth, benefits from costs reduction & productivity enhancement initiatives, and investments to leverage new business opportunities.
For 2016, the company's adjusted earnings were $5.51 per share, above the Zacks Consensus Estimate of $5.43 and the year-ago tally of $5.25.
Revenues: In the quarter, International Flavors & Fragrances' net sales totaled $762.6 million, above the Zacks Consensus Estimate of $760.2 million. The company's net sales increased 7% year over year. On a constant currency basis, revenues climbed 7% from the prior-year period. New business wins as well as synergistic benefits from the acquired David Michael (in Oct 2016) primarily attributed to the sales growth.
From a geographical perspective, revenues in North America increased 10% year over year, while revenues in Europe, Africa and the Middle East were up 8% or rose 10% on a constant currency basis. Revenues from Latin American operations decreased 2% year over year or fell 3% on a constant currency basis, while that in Greater Asia were up 7% year over year or up 7% on a constant currency basis.
International Flavors & Fragrances operates in two segments: Flavors and Fragrances.
Revenues generated from the Flavors business increased 13% year over year to $377.7 million. It accounted for nearly 49.5% of net sales. On a constant currency basis, Flavors revenues rose 14% year over year.
The Fragrances business' revenues in the quarter were $384.9 million, up 1% year over year. It represented 50.5% of net sales in the quarter. On a constant currency basis, revenues grew 1% year over year.
For 2016, the company's net sales totaled $3,116.4 million, in line with the Zacks Consensus Estimate but up 3% year over year.
Margins: In the quarter, International Flavors & Fragrances' gross profit increased 5.5% year over year. Gross margin in the quarter was 43.8% down from 44.3% in the year-ago quarter. Research and development expenses, as a percentage of sales, inched up 30 basis points (bps) to 8.3%, while selling and administrative expenses decreased 60 bps to 16.8%.
Adjusted operating margin was 17.8% compared with 18.2% in the year-ago quarter. Interest expenses grew 5% year over year to $12.3 million.
Balance Sheet and Cash Flow: Exiting the fourth quarter, International Flavors & Fragrances had cash and cash equivalents of approximately $324 million, down from $498.7 million in the preceding quarter. Long-term debt decreased 3.9% sequentially to $1,066.9 million.
In 2016, the company generated net cash of $535.4 million from its operating activities, up 23.5% year over year. Capital spending amounted to $126.4 million, up from $101 million spent in 2015.
During the year, the company paid cash dividends of approximately $184.9 million to its shareholders, while using $127.4 million for the purchase of treasury stocks.
Outlook: For 2017, International Flavors & Fragrances anticipates net sales to grow 7.5-8.5% on a currency neutral basis. Organic revenue growth is anticipated to be within 3-4%, while roughly 4.5% gain is predicted from acquisitions. Adverse foreign currency movements are likely to negatively impact sales by 2.5%.
Operating profit is likely to grow within 5.5-6.5%, including organic growth of 4-5% and acquisition gain of 1.5%. Excluding the impact of 2% forex woes, adjusted operating profit will increase 3.5-4.5%.
Earnings per share will likely increase 6.5-7.5%. Excluding 2.5% negative forex impact, adjusted earnings will likely rise 4-5%.
The company anticipates its acquired businesses, David Michael and Fragrance Resources (Jan 2017) to contribute incremental revenues of $85 million and $75 million, respectively.
Also, the company has initiated a new multi-year productivity program that will enable it to check on costs, make strategic investments and expand businesses globally. It intends to reduce its workforce by 5% globally. By 2019-end, the company anticipates this productivity program to yield annualized savings in the range of $40-$45 million. Related pre-tax charges are predicted to be $35 million in 2017, including $10 million in the first quarter. Charges of $40 million are expected in 2018.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions
International Flavors & Fragrances, Inc. Price and Consensus
At this time, International Flavor's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is International Flavors (IFF) Up 4% Since the Last Earnings Report?
It has been about a month since the last earnings report for International Flavors & Fragrances, Inc. (IFF - Free Report) . Shares have added nearly 4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Fourth-Quarter 2016 Highlights
International Flavors & Fragrances reported better-than-expected results for fourth-quarter 2016. The company's adjusted earnings came in at $1.22 per share, surpassing the Zacks Consensus Estimate of $1.16 by 5.2%. Also, the bottom line was 16.2% above the year-ago tally of $1.05.
Excluding the impact of foreign currency movements, the company's adjusted earnings increased nearly 6% year over year. The bottom-line growth came on the back of volume growth, benefits from costs reduction & productivity enhancement initiatives, and investments to leverage new business opportunities.
For 2016, the company's adjusted earnings were $5.51 per share, above the Zacks Consensus Estimate of $5.43 and the year-ago tally of $5.25.
Revenues: In the quarter, International Flavors & Fragrances' net sales totaled $762.6 million, above the Zacks Consensus Estimate of $760.2 million. The company's net sales increased 7% year over year. On a constant currency basis, revenues climbed 7% from the prior-year period. New business wins as well as synergistic benefits from the acquired David Michael (in Oct 2016) primarily attributed to the sales growth.
From a geographical perspective, revenues in North America increased 10% year over year, while revenues in Europe, Africa and the Middle East were up 8% or rose 10% on a constant currency basis. Revenues from Latin American operations decreased 2% year over year or fell 3% on a constant currency basis, while that in Greater Asia were up 7% year over year or up 7% on a constant currency basis.
International Flavors & Fragrances operates in two segments: Flavors and Fragrances.
Revenues generated from the Flavors business increased 13% year over year to $377.7 million. It accounted for nearly 49.5% of net sales. On a constant currency basis, Flavors revenues rose 14% year over year.
The Fragrances business' revenues in the quarter were $384.9 million, up 1% year over year. It represented 50.5% of net sales in the quarter. On a constant currency basis, revenues grew 1% year over year.
For 2016, the company's net sales totaled $3,116.4 million, in line with the Zacks Consensus Estimate but up 3% year over year.
Margins: In the quarter, International Flavors & Fragrances' gross profit increased 5.5% year over year. Gross margin in the quarter was 43.8% down from 44.3% in the year-ago quarter. Research and development expenses, as a percentage of sales, inched up 30 basis points (bps) to 8.3%, while selling and administrative expenses decreased 60 bps to 16.8%.
Adjusted operating margin was 17.8% compared with 18.2% in the year-ago quarter. Interest expenses grew 5% year over year to $12.3 million.
Balance Sheet and Cash Flow: Exiting the fourth quarter, International Flavors & Fragrances had cash and cash equivalents of approximately $324 million, down from $498.7 million in the preceding quarter. Long-term debt decreased 3.9% sequentially to $1,066.9 million.
In 2016, the company generated net cash of $535.4 million from its operating activities, up 23.5% year over year. Capital spending amounted to $126.4 million, up from $101 million spent in 2015.
During the year, the company paid cash dividends of approximately $184.9 million to its shareholders, while using $127.4 million for the purchase of treasury stocks.
Outlook: For 2017, International Flavors & Fragrances anticipates net sales to grow 7.5-8.5% on a currency neutral basis. Organic revenue growth is anticipated to be within 3-4%, while roughly 4.5% gain is predicted from acquisitions. Adverse foreign currency movements are likely to negatively impact sales by 2.5%.
Operating profit is likely to grow within 5.5-6.5%, including organic growth of 4-5% and acquisition gain of 1.5%. Excluding the impact of 2% forex woes, adjusted operating profit will increase 3.5-4.5%.
Earnings per share will likely increase 6.5-7.5%. Excluding 2.5% negative forex impact, adjusted earnings will likely rise 4-5%.
The company anticipates its acquired businesses, David Michael and Fragrance Resources (Jan 2017) to contribute incremental revenues of $85 million and $75 million, respectively.
Also, the company has initiated a new multi-year productivity program that will enable it to check on costs, make strategic investments and expand businesses globally. It intends to reduce its workforce by 5% globally. By 2019-end, the company anticipates this productivity program to yield annualized savings in the range of $40-$45 million. Related pre-tax charges are predicted to be $35 million in 2017, including $10 million in the first quarter. Charges of $40 million are expected in 2018.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions
International Flavors & Fragrances, Inc. Price and Consensus
International Flavors & Fragrances, Inc. Price and Consensus | Internationa Flavors & Fragrances, Inc. Quote
VGM Scores
At this time, International Flavor's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.