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International Flavors (IFF) Q2 Earnings: What's in Store?

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International Flavors & Fragrances Inc. (IFF - Free Report) is scheduled to report second-quarter 2018 results on Aug 7, after the closing bell.
 
The company has delivered better-than-expected results in the last four quarters, recording a positive average earnings surprise of 5.59%. Notably, in the last reported quarter, the company’s earnings of $1.69 per share surpassed the Zacks Consensus Estimate by 6.96%. Estimates for the to-be-reported quarter are pegged at $1.61, depicting a 7.33% year-over-year growth.
 
 
In the last year, the company’s shares have dipped 1.5%, against the industry’s gain of 2.1%.
 
Let us see how things are shaping up for the company prior to this announcement.
 
Earnings Whispers
 
Our proven model does not conclusively show that International Flavors & Fragrances is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
 
Zacks ESP: International Flavors & Fragrances has an Earnings ESP of -0.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: International Flavors & Fragrances carries a Zacks Rank #4 (Sell). Consequently, our proven model does not indicate earnings beat in the to-be reported quarter.
 
As it is, we caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
 
Internationa Flavors & Fragrances, Inc. Price and EPS Surprise
 
Internationa Flavors & Fragrances, Inc. Price and EPS Surprise

Internationa Flavors & Fragrances, Inc. price-eps-surprise | Internationa Flavors & Fragrances, Inc. Quote

Factors to Influence Q2 Results

International Flavors & Fragrances’ expectation for the full year gives a glimpse of the factors that are likely to influence the quarterly results. The company anticipates gaining from acquired businesses as well as its multi-year productivity program, enabling it to control costs, make strategic investments and expand businesses globally. Moreover, the company's exhaustive research and development wing focuses on the development of new and innovative compounds. Veraspice — a fragrance ingredient; Tastepoint — a new company to serve middle-market customers; and Re-Imagine — programs that enable capture of unaddressed opportunities in the food and beverage industry as well as assist the company in its innovation initiatives, will prove beneficial in the quarter.

 
The Zacks Consensus Estimate for total revenues is pegged at $899 million, projecting year-over-year growth of 6.7%.
 
For the Flavors segment, continued growth in a number of consumer food companies, as well as the need for more transparency in consumer products, has created opportunities for the company. Demand for flavors is strong from Savory, Sweet and Dairy categories. The segment will gain from the PowderPure buyout and the creation of Tastepoint — a new company to serve middle-market customers. Both the buyout and the company formation were accomplished in 2017.
 
The Flavors segment’s Zacks Consensus Estimate for revenues is pegged at $443 million for the second quarter of 2018. This projection reflects year-over-year growth of 7% for the segment. It is expected to report an operating profit of $107 million in the to-be-reported quarter, up 7% from the prior year reported figure. This will likely be driven by volume growth and benefits from productivity initiatives.
 
In addition to growing population and rising product demand, the company’s Fragrances segment will gain from new business wins and more businesses from existing customers. Demand for Fragrance Compounds and Ingredients remain strong. Further, the acquisition of Fragrance Resources in 2017 and the creation of new fragrance ingredient called Veraspice will act as growth drivers.
 
The Fragrances segment’s Zacks Consensus Estimate for revenues is pegged at $459 million for the second quarter of 2018. This projection is above $$429 million recorded in the year-ago quarter. The segment’s operating profit is expected to rise 4% year over year to $88 million.
 
Meanwhile, rise in raw material costs as well as higher selling, general and administrative expenses will constrain margins. Moreover, a high-debt level and unfavorable movements in foreign currencies are causes of concern.
 
The Zacks Consensus Estimate for earnings is pegged at $1.61 for the quarter, reflecting year-over-year growth of 7.33%.
 
Stocks to Consider
 
Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.
 
Orion Engineered Carbons S.A (OEC - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #2. Its shares have gone up 54% in a year’s time.  You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Trecora Resources (TREC - Free Report) has an Earnings ESP of +13.64% and a Zacks Rank #3. Its shares have gained 16% over the past year.
 
Marrone Bio Innovations, Inc. (MBII - Free Report) has an Earnings ESP of +25.00% and a Zacks Rank #3. Its shares have appreciated 104% over the past year.
 
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