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International Flavors (IFF) Q1 Earnings & Sales Lag, Up Y/Y
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International Flavors & Fragrances Inc. (IFF - Free Report) lagged earnings and revenue estimates in first-quarter 2017 by 0.7% and 0.8%, respectively.
The company’s adjusted earnings were $1.52 per share, below the Zacks Consensus Estimate of $1.53. However, the bottom line improved 4.8% from the year-ago tally of $1.45.
Excluding the negative 4% impact from foreign currency movements, the company’s adjusted earnings increased nearly 9% year over year. The bottom-line growth was driven by improved revenue generation, favorable tax rate and lower shares outstanding.
Revenues generated in the quarter totaled $828.3 million, missing the Zacks Consensus Estimate of $835.9 million. However, the top line increased 6% year over year on the back of improved segmental performance and acquisition gains. On a constant currency basis, revenues climbed 7% from the prior-year period.
From a geographical perspective, revenues in North America increased 14% year over year while revenues in Europe, Africa and the Middle East were up 7% or rose 11% on a constant currency basis. Revenues from Latin American operations decreased 2% year over year or fell 4% on a constant currency basis while sales in Greater Asia were up 2%.
Segmental Revenues
International Flavors & Fragrances operates in two segments: Flavors and Fragrances.
Revenues generated from the Flavors business increased 9% year over year to $406.2 million. It accounted for nearly 49% of net sales. On a constant currency basis, Flavors revenues rose 10% year over year.
The Fragrances business’ revenues in the quarter were $422.1 million, up 3% year over year. It represented 51% of net sales in the quarter. On a constant currency basis, revenues grew 3% year over year.
Margins
In the quarter, International Flavors & Fragrances’ gross profit increased 2.5% year over year while as a percentage of revenues it was 44.8% compared with 46.1% in the year-ago quarter. Research and development expenses, as a percentage of sales, inched up 30 basis points (bps) to 8.4% while selling and administrative expenses decreased 10 bps to 15.8%.
Adjusted operating margin was 19.7% compared with 21.3% in the year-ago quarter. Interest expenses grew 3% year over year to $12.8 million.
Balance Sheet and Cash Flow
Exiting the first quarter, International Flavors & Fragrances had cash and cash equivalents of approximately $300.1 million, below $324 million recorded in the preceding quarter. Long-term debt increased 11.2% sequentially to $1,186.4 million.
In the quarter, the company’s net cash generation from operating activities decreased 45.7% year over year to $21.7 million. Capital spending totaled $26.7 million, up from $22.5 million in the year-ago quarter.
Cash dividend paid in the quarter amounted to $50.7 million while roughly $37.6 million worth of treasury stocks were repurchased.
Outlook
For 2017, International Flavors & Fragrances anticipates net sales to grow 7.5−8.5% on a currency neutral basis. Adverse foreign currency movements are likely to negatively impact sales by 1.5%.
Operating profit is likely to grow 5.5−6.5%. Excluding the impact of 2.5% forex woes, adjusted operating profit will increase 3.0−4.0%.
Earnings per share will likely increase 6.5−7.5%. Excluding 3.0% negative forex impact, adjusted earnings will likely rise 3.5−4.5%.
In the quarters ahead, the company anticipates gaining from its acquired businesses as well as from its multi-year productivity program, enabling the company to check on costs, make strategic investments and expand businesses globally.
International Flavors & Fragrances, Inc. Price and Consensus
With a market capitalization of $10.85 billion, International Flavors & Fragrances presently carries a Zacks Rank #2 (Buy). Others stocks worth considering in the chemical industry include KMG Chemicals, Inc. , Kraton Corporation and Ferro Corporation . While KMG Chemicals and Kraton Corporation sport a Zacks Rank #1 (Strong Buy), Ferro Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KMG Chemicals witnessed upward earnings estimate revisions for fiscal 2017 and fiscal 2018, over the past 60 days. The company posted an average positive earnings surprise of 10.63% for the trailing four quarters.
Kraton Corporation’s bottom-line estimates for 2017 and 2018 improved over the last 60 days. In the last quarter, the company reported better-than-expected results, with a positive earnings surprise of 34.78%.
Ferro Corporation delivered a positive average earnings surprise of 19.63% for the last four quarters. Its earnings estimates for 2017 and 2018 were revised upward over the past 60 days.
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International Flavors (IFF) Q1 Earnings & Sales Lag, Up Y/Y
International Flavors & Fragrances Inc. (IFF - Free Report) lagged earnings and revenue estimates in first-quarter 2017 by 0.7% and 0.8%, respectively.
The company’s adjusted earnings were $1.52 per share, below the Zacks Consensus Estimate of $1.53. However, the bottom line improved 4.8% from the year-ago tally of $1.45.
Excluding the negative 4% impact from foreign currency movements, the company’s adjusted earnings increased nearly 9% year over year. The bottom-line growth was driven by improved revenue generation, favorable tax rate and lower shares outstanding.
Revenues generated in the quarter totaled $828.3 million, missing the Zacks Consensus Estimate of $835.9 million. However, the top line increased 6% year over year on the back of improved segmental performance and acquisition gains. On a constant currency basis, revenues climbed 7% from the prior-year period.
From a geographical perspective, revenues in North America increased 14% year over year while revenues in Europe, Africa and the Middle East were up 7% or rose 11% on a constant currency basis. Revenues from Latin American operations decreased 2% year over year or fell 4% on a constant currency basis while sales in Greater Asia were up 2%.
Segmental Revenues
International Flavors & Fragrances operates in two segments: Flavors and Fragrances.
Revenues generated from the Flavors business increased 9% year over year to $406.2 million. It accounted for nearly 49% of net sales. On a constant currency basis, Flavors revenues rose 10% year over year.
The Fragrances business’ revenues in the quarter were $422.1 million, up 3% year over year. It represented 51% of net sales in the quarter. On a constant currency basis, revenues grew 3% year over year.
Margins
In the quarter, International Flavors & Fragrances’ gross profit increased 2.5% year over year while as a percentage of revenues it was 44.8% compared with 46.1% in the year-ago quarter. Research and development expenses, as a percentage of sales, inched up 30 basis points (bps) to 8.4% while selling and administrative expenses decreased 10 bps to 15.8%.
Adjusted operating margin was 19.7% compared with 21.3% in the year-ago quarter. Interest expenses grew 3% year over year to $12.8 million.
Balance Sheet and Cash Flow
Exiting the first quarter, International Flavors & Fragrances had cash and cash equivalents of approximately $300.1 million, below $324 million recorded in the preceding quarter. Long-term debt increased 11.2% sequentially to $1,186.4 million.
In the quarter, the company’s net cash generation from operating activities decreased 45.7% year over year to $21.7 million. Capital spending totaled $26.7 million, up from $22.5 million in the year-ago quarter.
Cash dividend paid in the quarter amounted to $50.7 million while roughly $37.6 million worth of treasury stocks were repurchased.
Outlook
For 2017, International Flavors & Fragrances anticipates net sales to grow 7.5−8.5% on a currency neutral basis. Adverse foreign currency movements are likely to negatively impact sales by 1.5%.
Operating profit is likely to grow 5.5−6.5%. Excluding the impact of 2.5% forex woes, adjusted operating profit will increase 3.0−4.0%.
Earnings per share will likely increase 6.5−7.5%. Excluding 3.0% negative forex impact, adjusted earnings will likely rise 3.5−4.5%.
In the quarters ahead, the company anticipates gaining from its acquired businesses as well as from its multi-year productivity program, enabling the company to check on costs, make strategic investments and expand businesses globally.
International Flavors & Fragrances, Inc. Price and Consensus
International Flavors & Fragrances, Inc. Price and Consensus | Internationa Flavors & Fragrances, Inc. Quote
Zacks Rank & Key Picks
With a market capitalization of $10.85 billion, International Flavors & Fragrances presently carries a Zacks Rank #2 (Buy). Others stocks worth considering in the chemical industry include KMG Chemicals, Inc. , Kraton Corporation and Ferro Corporation . While KMG Chemicals and Kraton Corporation sport a Zacks Rank #1 (Strong Buy), Ferro Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
KMG Chemicals witnessed upward earnings estimate revisions for fiscal 2017 and fiscal 2018, over the past 60 days. The company posted an average positive earnings surprise of 10.63% for the trailing four quarters.
Kraton Corporation’s bottom-line estimates for 2017 and 2018 improved over the last 60 days. In the last quarter, the company reported better-than-expected results, with a positive earnings surprise of 34.78%.
Ferro Corporation delivered a positive average earnings surprise of 19.63% for the last four quarters. Its earnings estimates for 2017 and 2018 were revised upward over the past 60 days.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>