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International Flavors' Growth Potential Solid, Runs Risks
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We issued an updated research report on International Flavors & Fragrances Inc. (IFF - Free Report) on Mar 27. The company is a leading manufacturer and supplier of fragrance and flavor products.
Since the release of fourth-quarter 2016 results on Feb 15, shares of this Zacks Rank #3 (Hold) company yielded an 11.23% return, outperforming the gain of 0.74% recorded by the Zacks categorized Chemicals Specialty industry.
However, on a P/E (TTM) basis, International Flavors & Fragrances’ shares looks overvalued compared with the broader industry with respective tallies of 24.10x and 17.86x, since Feb 15. Also, the stock is currently trading above the average of P/E multiples since the same date.
Over the long run, we believe International Flavors & Fragrances’ efforts to expand business in emerging nations as well as research and development of new and innovative compounds bode well for the company. On the back of organic and inorganic growth strategies, the company hopes to achieve around 4–6% expansion in local currency sales, about 7–9% operating profit growth and over 10% rise in earnings per share in 2016–2020 timeframe. Also, the company anticipates rewarding its shareholders with roughly 50–60% of net income.
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. Earnings per share will likely increase 6.5−7.5% and adjusted earnings are expected to rise 4−5%. Also, the company anticipates its acquired businesses, David Michael and Fragrance Resources (Jan 2017) to contribute incremental revenues of $85 million and $75 million, respectively.
In addition, International Flavors & Fragrances has initiated a new multi-year productivity program that will enable it to check on costs, make strategic investments and expand businesses globally. It also intends to reduce its workforce by 5% on a global basis. By 2019-end, the company anticipates this productivity program to yield annualized savings in the range of $40−$45 million.
However, International Flavors & Fragrances is exposed to risks arising from adverse currency movements (negative 2.5% impact on earnings per share and sales growth expected in 2017), geopolitical issues and stiff competition. Also, majority of the company’s raw materials are sourced from various countries across the globe. Any disruptions in the supply or quality of ingredients or rising prices of ingredients purchased could reduce profitability.
Stocks to Consider
International Flavors & Fragrances currently has a $10.5 billion market capitalization. Some better-ranked stocks in the chemical industry include KMG Chemicals, Inc. , H.B. Fuller Company (FUL - Free Report) and Valvoline Inc. (VVV - Free Report) . While KMG Chemicals sports a Zacks Rank #1 (Strong Buy), both H.B. Fuller and Valvoline carry 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. Also, the company has an average positive earnings surprise of 10.63% for the last four quarters.
H.B. Fuller’s earnings estimates for fiscal 2017 and fiscal 2018 improved over the last 60 days. Also, the company has an average positive earnings surprise of 0.04% for the last four quarters.
Valvoline’s earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Also, the company has an average positive earnings surprise of 3.65% for the last four quarters.
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International Flavors' Growth Potential Solid, Runs Risks
We issued an updated research report on International Flavors & Fragrances Inc. (IFF - Free Report) on Mar 27. The company is a leading manufacturer and supplier of fragrance and flavor products.
Since the release of fourth-quarter 2016 results on Feb 15, shares of this Zacks Rank #3 (Hold) company yielded an 11.23% return, outperforming the gain of 0.74% recorded by the Zacks categorized Chemicals Specialty industry.
However, on a P/E (TTM) basis, International Flavors & Fragrances’ shares looks overvalued compared with the broader industry with respective tallies of 24.10x and 17.86x, since Feb 15. Also, the stock is currently trading above the average of P/E multiples since the same date.
Over the long run, we believe International Flavors & Fragrances’ efforts to expand business in emerging nations as well as research and development of new and innovative compounds bode well for the company. On the back of organic and inorganic growth strategies, the company hopes to achieve around 4–6% expansion in local currency sales, about 7–9% operating profit growth and over 10% rise in earnings per share in 2016–2020 timeframe. Also, the company anticipates rewarding its shareholders with roughly 50–60% of net income.
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. Earnings per share will likely increase 6.5−7.5% and adjusted earnings are expected to rise 4−5%. Also, the company anticipates its acquired businesses, David Michael and Fragrance Resources (Jan 2017) to contribute incremental revenues of $85 million and $75 million, respectively.
In addition, International Flavors & Fragrances has initiated a new multi-year productivity program that will enable it to check on costs, make strategic investments and expand businesses globally. It also intends to reduce its workforce by 5% on a global basis. By 2019-end, the company anticipates this productivity program to yield annualized savings in the range of $40−$45 million.
However, International Flavors & Fragrances is exposed to risks arising from adverse currency movements (negative 2.5% impact on earnings per share and sales growth expected in 2017), geopolitical issues and stiff competition. Also, majority of the company’s raw materials are sourced from various countries across the globe. Any disruptions in the supply or quality of ingredients or rising prices of ingredients purchased could reduce profitability.
Stocks to Consider
International Flavors & Fragrances currently has a $10.5 billion market capitalization. Some better-ranked stocks in the chemical industry include KMG Chemicals, Inc. , H.B. Fuller Company (FUL - Free Report) and Valvoline Inc. (VVV - Free Report) . While KMG Chemicals sports a Zacks Rank #1 (Strong Buy), both H.B. Fuller and Valvoline carry 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. Also, the company has an average positive earnings surprise of 10.63% for the last four quarters.
H.B. Fuller’s earnings estimates for fiscal 2017 and fiscal 2018 improved over the last 60 days. Also, the company has an average positive earnings surprise of 0.04% for the last four quarters.
Valvoline’s earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Also, the company has an average positive earnings surprise of 3.65% for the last four quarters.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging
phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>