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International Flavors (IFF) Q2 Earnings: A Beat in Store?

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International Flavors & Fragrances Inc. (IFF - Free Report) is scheduled to report second-quarter 2017 results on Aug 8, after market close.

The company pulled off an average positive earnings surprise of 0.96% in the last four quarters, surpassing estimates in two and lagging in others. We believe that a sound financial performance and growth prospects have lifted investor sentiments for the company. In the last six months, its shares have yielded 14.35% return, outperforming the gain of 3.33% recorded by the industry.

Let us see how things are shaping up for the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that International Flavors & Fragrances is likely to pull off an earnings surprise this quarter. This is because the company has the combination of two key ingredients for a possible earnings beat – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: International Flavors & Fragrances currently has an Earnings ESP of +0.69%, with the Most Accurate estimate of $1.45 above the Zacks Consensus Estimate of $1.44.

Zacks Rank: International Flavors & Fragrances’ Zacks Rank #2 increases the predictive power of ESP. Moreover, its positive ESP makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

What is Driving the Better-than-Expected Earnings?

We believe that International Flavors & Fragrances is poised to benefit from its internationally diversified business structure and huge product base. Key strategic markets, including North America, Africa & Middle East, are potential growth drivers for the company. Also, it is working hard for the development of new and innovative compounds through its exhaustive research and development wing.     

Also, the company’s acquired assets will help it expand its offerings and in turn, its profitability in the quarter. The buyout of David Michael business (in Oct 2016) was is in sync with the company’s Vision 2020 business strategy and has enabled it to expand in the fast-growing middle-markets. It is predicted to generate revenues of $85 million in 2017. In Jan 2017, the company acquired Fragrance Resources. This asset is likely to generate revenues of $75 million in 2017 as well as modestly boost earnings. In April, the company acquired Oregon-based Columbia Phytotechnology LLC (also known as PowderPure).

On a separate note, International Flavors & Fragrances recently announced an 8% increase in its quarterly dividend rate from 64 cents to 69 cents per share. We believe such disbursements are reflective of the company’s shareholder-friendly policies.
 
Other Stocks to Consider

Here are some other companies in the industry that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Versum Materials, Inc. (VSM - Free Report) , with an Earnings ESP of +4.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferro Corporation (FOE - Free Report) , with an Earnings ESP of +3.23% and a Zacks Rank #2.

Celanese Corporation (CE - Free Report) , with an Earnings ESP of +0.52% and a Zacks Rank #3.

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