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International Flavors (IFF) Q2 Earnings Miss, Guidance Cut

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International Flavors & Fragrances Inc. (IFF - Free Report) reported adjusted earnings of $1.30 per share in second-quarter 2019, missing the Zacks Consensus Estimate of $1.61. Also, the bottom-line figure declined 21.6% from the year-ago quarter’s $1.66.

Including one-time items, earnings per share in the quarter came in at $1.20 per share compared with $1.25 recorded in the year-ago quarter.

In the reported quarter, International Flavors’ net sales were $1.29 billion, reflecting a year-over-year jump of 40%. However, the top-line figure missed the Zacks Consensus Estimate of $1.30 billion.

Operational Highlights

In the second quarter, International Flavors’ cost of goods sold surged 43% year over year to $745 million. Adjusted gross profit increased 37% year over year to $547 million. Adjusted gross margin came in at 42.3% compared with 43.4% witnessed in the year-ago quarter.
Research and development expenses flared up 13% year over year to $84.8 million. Adjusted selling and administrative expenses in the June-end quarter rose 38% year over year to $200 million. Adjusted operating profit increased 26.6% year over year to $214 million. Adjusted operating margin came in at 16.5% compared with the year-ago quarter’s 18.3%. 

Internationa Flavors & Fragrances, Inc. Price, Consensus and EPS Surprise

Segmental Performances

Revenues in the Taste segment decreased 4%, year over year, to $434.2 million during the April-June quarter. On a constant-currency basis, revenues edged down 1% year over year. Operating profit declined 11% year over year to $98 million.

Revenues generated from the Scent segment came in at $475.7 million, up 1% year over year. On a constant-currency basis, revenues improved 4% year over year. Operating profit climbed 13% year over year to $91.2 million.

Last October, International Flavors completed the acquisition of Frutarom Industries Ltd. The Frutarom segment’s revenues came in at $381.7 million and operating profit was $37 million during the quarter.

Financial Position

Exiting the second quarter, International Flavors had cash and cash equivalents of $454.8 million, down from the $648.5 million recorded at the end of 2018. Long-term debt fell to $4,428 million as of Jun 30, 2019, from $4,504 million as of Dec 31, 2018.

International Flavors generated $184.9 million of cash from operating activities during the six-month period ended Jun 30, 2019, compared with $55 million reported in the comparable period last year.

Capital invested in purchasing property, plant and equipment totaled $119 million during the six-month period ended Jun 30, 2019. Dividend paid totaled $155.5 million in the June-end quarter.

On Aug 5, International Flavors’ board increased its quarterly dividend by 3% to 75 cents per share. The dividend is payable on Oct 4, to shareholders of record as of Sep 23, 2019.

International Flavors updated its guidance for 2019. Sales are now projected at $5.15-$5.25 billion, indicating year-over-year growth of 3-5%. The company’s prior guidance was $5.2-$5.3 billion. Adjusted earnings per share are expected in the band of $4.85-$5.05 compared with the previous guidance of $4.90-$5.10. Adjusted earnings excluding amortization are anticipated between $6.15 and $6.35 compared with the previous projection of $6.30-$6.50. The company expects to achieve cost savings of $40 million this year.

Share Price Performance

Over the past year, International Flavors’ shares have gained 7.7%, outperforming the industry’s growth of 1.7%.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are SSR Mining Inc (SSRM - Free Report) , Alamos Gold Inc (AGI - Free Report) and Arconic Inc (ARNC - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SSR Mining has an expected earnings growth rate of 134.8% for 2019. The company’s shares have surged 58.7% in the past year.

Alamos Gold has a projected earnings growth rate of a whopping 260% for the current year. The company’s shares have gained 35.6% in a year’s time.

Arconic has an estimated earnings growth rate of 38.2% for the ongoing year. Its shares have moved up 12.2% over the past year.

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