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International Flavors (IFF) Q1 Earnings Top Estimates, View Up

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International Flavors & Fragrances Inc. (IFF - Free Report) reported adjusted earnings of $1.69 per share in first-quarter 2022, beating the Zacks Consensus Estimate of $1.31. The bottom line improved 6% from the year-ago quarter’s levels.
Including one-time items, the company reported earnings per share (EPS) of 96 cents against the prior-year quarter’s loss per share of 21 cents.

International Flavors’ net sales came in at $3,226 million in the March-end quarter, increasing 31% year over year. The upside was driven by the additional sales related to the merger with DuPont de Nemours, Inc.’s (DD - Free Report) Nutrition & Biosciences (N&B) business. The top line surpassed the Zacks Consensus Estimate of $3,181 million. During the January-March quarter, currency-neutral sales were up 13%, aided by double-digit growth in Nourish, Health & Biosciences and Pharma Solutions.

Operational Highlights

During the reported quarter, International Flavors’ adjusted cost of goods sold was up 36% year over year to $2,080 million. Adjusted gross profit climbed 22% year over year to $1,146 million. Adjusted gross margin came in at 36% compared with 38% in the year-ago quarter.

Research and development expenses increased 10% year over year to $157 million. Adjusted selling and administrative expenses rose 29% year on year to $404 million during the first quarter. Adjusted operating EBITDA came in at $702 million, up 23% from the prior-year quarter’s $569 million due to the incremental profit related to the merger with N&B. Adjusted operating EBITDA margin was 21.8% compared with the year-ago quarter’s 23.1%.

 

Segmental Performances

Revenues in the Nourish segment climbed 32% year over year to $1,731 million during the March-end quarter. Adjusted operating EBITDA was $329 million, up 22% year over year.

Revenues generated in the Health & Bioscience segment came in at $661 million compared with the year-earlier quarter’s $426 million. Adjusted operating EBITDA was $192 million in the quarter compared with $128 million in the prior-year quarter.

Scent segment revenues came in at $585 million compared with the year-ago quarter’s $569 million. Adjusted operating EBITDA declined 9% year over year to $116 million.

Revenues in Pharma Solutions were $249 million in the first quarter, up 54% year over year. Adjusted operating EBITDA increased 51% year over year to $65 million.

Financial Position

International Flavors had cash and cash equivalents of $661 million at the end of the first quarter, down from the $715 million witnessed at the end of 2021. Long-term debt was $10.7 billion at the first quarter’s end, flat compared with 2021-end.

International Flavors utilized $4 million cash in operating activities in the first quarter against cash generation of $358 million in the prior-year quarter. Capital invested in purchasing property, plant and equipment totaled $132 million in the quarter compared with $93 million in the year-ago quarter. Dividends paid summed $201 million in the first quarter.

2022 Guidance

International Flavors estimates sales to be around $12.6 billion to $13 billion in 2022, up from the prior guidance of $12.3 billion to $12.7 billion. The updated guidance reflects the expected Microbial Control divestiture, which is likely to be completed on Jul 1, 2022, and benefits from the Health Wright Products acquisition.

Adjusted EBITDA is expected to be between $2.5 billion and $2.6 billion. The adjusted EBITDA margin is projected to grow 4-8% on a currency-neutral basis. Currency-neutral sales growth for the year is expected to be around 9% to 12%. However, foreign currency translation will likely affect sales growth by 4 percentage points (PP) and adjusted operating EBITDA growth by 5 PP.

Price Performance

In the past year, International Flavors’ shares have lost 13.8% compared with the industry’s decline of 32.2%.

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Zacks Rank & Key Picks

International Flavors currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Consumer Staples sector include Inter Parfums, Inc. (IPAR - Free Report) and McCormick & Company (MKC - Free Report) . Both these stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inter Parfums has an expected earnings growth rate of 10.9% for 2022. The Zacks Consensus Estimate for IPAR’s current-year earnings has been revised 0.1% upward in the past 60 days and is pinned at $3.05 per share.

Inter Parfums’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 46.7%.

McCormick has an expected earnings growth rate of 3.9% for fiscal 2022. The Zacks Consensus Estimate for MKC’s fiscal 2022 earnings has been stable in the past 60 days and is pegged at $3.17 per share.

McCormick’s bottom line beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 7.3%.