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International Flavors (IFF) Beats on Q1 Earnings, Scraps View

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International Flavors & Fragrances Inc. (IFF - Free Report) reported adjusted earnings of $1.62 per share in first-quarter 2020, surpassing the Zacks Consensus Estimate of $1.60. The bottom-line figure also increased 3.2% from the year-ago quarter’s $1.57.

Including one-time items, earnings per share in the quarter came in at $1.15 per share compared with the 96 cents recorded in the year-ago quarter.

In the reported quarter, International Flavors’ net sales were $1.35 billion, reflecting year-over-year growth of 4%. In addition, the top-line figure beat the Zacks Consensus Estimate of $1.29 billion. In the first quarter, currency neutral sales increased 6% on broad-based growth in Scent and Taste.

Given the coronavirus pandemic-induced crisis, the company is witnessing significant demand for packaged food, beverage and hygiene and disinfection, which represents approximately 85% of its total 2019 revenues. The company continued to advance its integration planning with DuPont (DD - Free Report) Nutrition & Biosciences.

Operational Highlights

In the March-end quarter, International Flavors’ cost of goods sold was up 2% year over year to $781 million. Adjusted gross profit was up 5% year over year to $566.5 million. Adjusted gross margin came in at 42.1% compared with the 41.6% witnessed in the year-ago quarter.

Research and development expenses declined 5% year over year to $86 million. Adjusted selling and administrative expenses during the first quarter of 2020 increased 6.6% year over year to $210 million. Adjusted operating profit climbed 8.3% year over year to $222 million. Adjusted operating margin came in at 16.5% compared with the year-ago quarter’s 15.8%.

International Flavors Fragrances Inc Price, Consensus and EPS Surprise

Segmental Performances

The company has reported financial results in two segments, Taste and Scent, incorporating nearly all of the Frutarom business into the Taste segment.

Revenues in the Taste segment were up 3%, year over year, to $830.3 million during the January-March period. On a constant-currency basis, revenues improved 5% year over year on double-digit growth in Savory Solutions and Inclusions as well as low single-digit growth in Flavors and Natural Products Solutions. Operating profit climbed 4.6% year over year to $137 million.

Revenues generated in the Scent segment came in at $517 million, up 5% year over year. On a constant-currency basis, revenues were up 7% year over year on double-digit growth in Consumer Fragrance and high single-digit growth in Fragrance Ingredients. Operating profit increased 17% year over year to $105 million.

Financial Position

International Flavors had cash and cash equivalents of $443 million as of Mar 31, 2020, down from the $624 million as of Dec 31, 2019. Long-term debt fell to $3,947 million as of Mar 31, 2020, from $3,997 million as of Dec 31, 2019.

International Flavors generated $17 million of cash from operating activities during the reported quarter compared with the $47 million recorded in year-ago quarter. Capital invested in purchasing property, plant and equipment totaled $48 million in the March-end quarter. Dividend paid totaled $80 million in the first quarter.

Revokes Guidance

International Flavors has withdrawn the financial guidance for the current year on account of the uncertain impact of the coronavirus pandemic.  

The company will continue to effectively manage balance sheet by taking necessary actions to generate strong cash flow and to maintain ample liquidity.

Price Performance

Over the past year, International Flavors’ shares have lost 1.4% compared with the industry’s decline of 16.3%.

Zacks Rank & Key Picks

International Flavors currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Consumer Staples space are The Clorox Company (CLX - Free Report) and Conagra Brands, Inc. (CAG - Free Report) . While Clorox flaunts a Zacks Rank #1 (Strong Buy), Conagra carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clorox has a projected long-term EPS growth rate of 5.8%. The stock has appreciated 38% in the past year.

Conagra has an estimated long-term earnings growth rate of 7%. Shares of the company have gained 18.9% over the past year.

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