We recently reiterated our Neutral recommendation on New York-based International Flavors & Fragrances Inc. (IFF), anticipating the company to perform in line with the broader market.
International Flavors & Fragrances is one of the leading creators and manufacturers of fragrance and flavor products. The company provided a solid year-to-date return of 35.6%. Long-term growth prospects are bright for the company as consumer spending is growing as a result of strengthening global economy.
Over the long term (2013-2015 period), International Flavors & Fragrances hopes to achieve around 4%-6% expansion in local currency sales, about 7%-9% operating profit growth and over 10% earnings per share growth. Capital spending over the years will be given emphasis to seize opportunities in emerging markets. Besides, bolt-on acquisitions will be given preferences to gain access to desirable customers, regions, or technologies.
Talking of innovations, International Flavors & Fragrances’ collaboration with Amyris to develop and commercialize cost-effective Fragrance Ingredients deserves special mention. We believe that new business wins, geographical diversification, wide product lines, continuous accomplishments in research and intense consumer insight will be advantageous for International Flavors & Fragrances, going forward.
Despite these compelling long-term growth prospects, near-term headwinds surrounding the company force us to remain on the sidelines. Risks arising from increase in debt levels as well as negative impact from foreign currency translation might prove detrimental to growth.
Others Stocks to Consider
International Flavors & Fragrances currently has a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are Ferro Corporation (FOE) with a Zacks Rank #1 (Strong Buy) while Sigma-Aldrich Corporation (SIAL) and Methanex Corporation (MEOH) each carry a Zacks Rank #2 (Buy).