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What's in Store for International Flavors (IFF) Q4 Earnings?

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International Flavors & Fragrances Inc. (IFF - Free Report) is scheduled to report fourth-quarter 2019 results after the closing bell on Feb 12.

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for International Flavors’ fourth-quarter revenues is currently pegged at $1,283 million, indicating an increase of 5.2% from the year-ago quarter. The Zacks Consensus Estimate for earnings per share is pegged at $1.42, suggesting growth of 16.4% year on year.

Let’s see how things are shaping up prior to this announcement.

Factors Setting the Tone

The company has been benefiting from favorable markets for flavors and fragrances driven by growth in emerging markets. Further, new business wins and the Frutarom acquisition are anticipated to have aided the company’s performance during the period under consideration. Together, International Flavors and Frutarom have created a global leader in natural taste, scent and nutrition with a broader customer base, more diversified product offerings and more exposure to end markets with a focus on naturals and health and wellness.

International Flavors’ focus on driving efficiency through its cost and productivity initiatives, margin improvements as well as acquisition-related synergies and favorable taxes are anticipated to have boosted overall profitability during the December-end quarter. However, raw-material cost inflation and higher operating expenses might have dragged down the company’s margins during this period.

Additionally, higher interest expenses resulting from debt raised to fund the Frutarom buyout and unfavorable foreign-currency translation impact are likely to have dented the to-be-reported quarter’s profitability.

The Flavors segment’s Zacks Consensus Estimate for revenues is pegged at $428 million for the October-December quarter. This projection indicates growth of 6.4% from the prior-year quarter’s $402 million. It is anticipated to report an operating profit of $94 million in the fourth quarter, suggesting a year-over-year rise of 7.7%. The segment is poised to grow on improved volumes, business wins and robust project pipeline.

The Zacks Consensus Estimate for the Fragrances segment’s revenues is pegged at $474 million for the soon-to-be-reported quarter, projecting 3.5% growth from the $458 million recorded in the year-earlier period. The segment’s operating profit estimate is pinned at $72 million, suggesting year-over-year growth of 5.8%.

Major Development in the Quarter

In December 2019, International Flavors entered into a definitive merger agreement with DuPont’s DD Nutrition & Biosciences (‘’N&B’’) business unit to form a new entity, focused on creating a leading global integrated solution.

Under the terms of agreement, DuPont shareholders will own 55.4% of the newly-formed entity, while International Flavors shareholders will hold the remaining.

The transaction is likely to close by the end of first-quarter 2021 upon approval by International Flavors’ shareholders. International Flavors expects to realize cost savings of around $300 million on a run-rate basis by the end of the third year after closing the transaction. In fact, these cost synergies will be driven by streamlining overhead, procurement excellence and manufacturing efficiencies.

International Flavors & Fragrances Inc. Price and EPS Surprise

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for International Flavors this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for International Flavors is 0.00%. This is because currently the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at $1.41 per share.

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

Price Performance

Over the past year, the company’s shares have gained 0.3% as against the industry’s loss of 10.2%.

Stocks to Consider

Here are a few Consumer Staples stocks which you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

The Kraft Heinz Company KHC has an Earnings ESP of +1.33% and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Monster Beverage Corporation MNST has an Earnings ESP of +3.38% and carries a Zacks Rank of 2, at present.

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