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International Flavors & Fragrances (IFF) Up 7.6% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Internationa Flavors & Fragrances, Inc. (IFF - Free Report) . Shares have added about 7.6% 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 drivers.
International Flavors Q1 Earnings & Sales Lag, Up Y/Y
International Flavors & Fragrances reported lower-than-expected first-quarter 2017 results, lagging earnings and revenue estimates 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, comprising 6% organic growth and 3% acquisition benefits. 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 or roughly 7% on a constant currency basis. Organic sales in the quarter grew 2% while acquisitions added 5% to top-line growth.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter.
Internationa Flavors & Fragrances, Inc. Price and Consensus
At this time, the stock has an average Growth Score of 'C', a grade with the same score on the momentum front. 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
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.
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International Flavors & Fragrances (IFF) Up 7.6% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Internationa Flavors & Fragrances, Inc. (IFF - Free Report) . Shares have added about 7.6% 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 drivers.
International Flavors Q1 Earnings & Sales Lag, Up Y/Y
International Flavors & Fragrances reported lower-than-expected first-quarter 2017 results, lagging earnings and revenue estimates 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, comprising 6% organic growth and 3% acquisition benefits. 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 or roughly 7% on a constant currency basis. Organic sales in the quarter grew 2% while acquisitions added 5% to top-line growth.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter.
Internationa Flavors & Fragrances, Inc. Price and Consensus
Internationa Flavors & Fragrances, Inc. Price and Consensus | Internationa Flavors & Fragrances, Inc. Quote
VGM Scores
At this time, the stock has an average Growth Score of 'C', a grade with the same score on the momentum front. 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
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.