It has been about a month since the last earnings report for International Flavors (IFF Quick QuoteIFF - Free Report) . Shares have added about 2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is International Flavors 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 Q3 Earnings Miss Estimates, Sales Rise Y/Y

International Flavors reported adjusted earnings of $1.04 per share in third-quarter 2024, missing the Zacks Consensus Estimate of $1.06 per share. However, the bottom line improved 17% from the year-ago quarter.

Including one-time items, the company reported earnings of 23 cents per share compared with the prior-year quarter’s 10 cents per share.

International Flavors’ net sales rose 3.7% year over year to $2.93 billion and surpassed the Zacks Consensus Estimate of $2.83 billion. On a comparable basis, currency-neutral sales were up 9% compared with last year’s quarter.

The upside was driven by double-digit growth in the Health & Biosciences  and Scent segments, as well as high-single digit rise in Nourish and Pharma Solutions segments. In the third quarter, volume improved across all businesses and was up high-single digits.

Q3 Margins Improve Y/Y

In the reported quarter, International Flavors’ cost of goods sold was down 1.2% year over year to $1.87 billion. The gross profit improved 13.9% year over year to $1.05 billion. The gross margin was 36% compared with 32.8% in the year-ago quarter.

Research and development expenses increased 3% year over year to $162 million. The selling and administrative expenses rose 11% year over year to $495 million in the third quarter.

The adjusted operating EBITDA was $568 million, up 12.3% from the prior-year quarter’s $506 million. The adjusted operating EBITDA margin was 19.4% compared with the year-ago quarter’s 17.9%.

Segmental Performances

Revenues in the Nourish segment improved 2.6% year over year to $1.49 billion in the September-end quarter. On a comparable basis, currency-neutral sales were up 7%. The segment’s adjusted operating EBITDA was $206 million, up 15.7% year over year. 

Revenues generated in the Health & Bioscience segment were $570 million compared with the year-earlier quarter’s figure of $518 million. Currency-neutral sales rose 12% on a comparable basis. The adjusted operating EBITDA was $173 million in the third quarter compared with $150 million in the prior-year quarter. 

The Scent segment’s revenues were $613 million compared with the year-ago quarter’s $615 million. Currency-neutral sales improved 10%, driven by double-digit growth in Consumer Fragrance and Fine Fragrance and a high-single-digit increase in Fragrance Ingredients. The adjusted operating EBITDA fell 3.1% year over year to $127 million. 

Revenues in Pharma Solutions were $256 million in the third quarter, up 8% year over year. Currency-neutral sales improved 8%, which was led by volume growth. The adjusted operating EBITDA rose 31.9% year over year to $62 million.

Cash Flow & Balance Sheet Updates

International Flavors had cash and cash equivalents of $567 million at the third quarter of 2024-end, down from $709 million at the end of 2023. Long-term debt was around $8.6 billion at the third-quarter end, down from $9.2 billion recorded as of Dec. 31, 2023.

International Flavors generated $702 million in operating activities in the first nine months of fiscal 2024 compared with $795 million in the prior year’s comparable period.

2024 Guidance

International Flavors expects sales at $11.3-$11.4 billion. Its prior stated expectation was $11.1-$11.3 billion.

Volume is expected to increase in the band of 5-6%, indicating an uptick from the prior expectation of 3-5%. This reflects improvement across all segments. The company expects pricing to be flat compared with the prior expectation of a 1% increase. 

Adjusted EBITDA is expected to be at the high-end of $2.1 billion to $2.17 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, International Flavors has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, International Flavors has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

International Flavors is part of the Zacks Chemical - Specialty industry. Over the past month, Ingevity (NGVT Quick QuoteNGVT - Free Report) , a stock from the same industry, has gained 0.4%. The company reported its results for the quarter ended September 2024 more than a month ago.

Ingevity reported revenues of $376.9 million in the last reported quarter, representing a year-over-year change of -15.5%. EPS of $1.10 for the same period compares with $1.21 a year ago.

Ingevity is expected to post a loss of $0.08 per share for the current quarter, representing a year-over-year change of -138.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Ingevity has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.