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

Zacks Equity Research

International Flavors & Fragrances Inc. IFF is scheduled to report fourth-quarter 2018 results after the closing bell on Feb 14.

 

In the last reported quarter, the company reported a rise of 5% in earnings while revenues improved 4%. Earnings came in line with the Zacks Consensus Estimate while revenues beat the same by 2%. Barring the last reported quarter, the company has surpassed estimates in three of the trailing four quarters. The company delivered a positive average earnings surprise of 4.44%.

 

Let us see how things are shaping up for the company prior to this announcement.

 

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

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 -1.95%, representing the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. While the Most Accurate Estimate is at $1.26, the Zacks Consensus Estimate is pegged higher at $1.29. 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 #3. While the company’s Zacks Rank is favorable, its negative ESP makes surprise prediction difficult.

 

Note that we caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions. They are best avoided.

 

Factors to Influence Q4 Results

 

The company’s results will be aided by favorable markets and new wins in the to-be-reported quarter. Further, the recent acquisition of Frutarom has not only broadened its customer base, product offerings and exposure to end markets, it will be accretive to its fourth-quarter 2018 top and bottom-line results.The Zacks Consensus Estimate for total revenues is pegged at $1.23 billion, projecting year-over-year growth of 43.9%.

 

The Flavors segment’s sales are likely to reflect momentum in its categories and regions. Moreover, the mid-sized go-to-market platform, Tastepoint, continues to deliver strong results. The Flavors segment’s Zacks Consensus Estimate for revenues is pegged at $412 million for the fourth quarter of 2018. This projection reflects year-over-year growth of 2% for the segment. It is anticipated to report an operating profit of $88 million in the to-be-reported quarter, up 4% from the prior year reported figure of $85 million.

 

Demand for Fragrance compounds and ingredients remain strong which is likely to drive the Fragrances segment’s results in the December-end quarter. The Fragrances segment’s Zacks Consensus Estimate for revenues is pegged at $460 million for the fourth quarter of 2018. This projection indicates improvement of 2% over the $453 million recorded in the year-ago quarter. However, the BASF supply chain disruption issue which impacted the margins of the Fragrances segment in the first three quarters of 2018, is likely to persist in the fourth quarter of 2018 as well. The segment’s operating profit is expected to decline 3% year over year to $73 million.

 

Focus to drive greater efficiencies throughout the business through costs and productivity initiatives and favorable taxes continue to support overall profitability. However, 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 $1.29 for the fourth-quarter 2018, reflecting year-over-year decline of 7.9%.

 

Price Performance

 

 

In the last year, the company’s shares have edged up 3.1% compared with the industry’s growth of 5.6%.

 

Stocks to Consider

 

Here are some companies in the same space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

 

Eldorado Gold Corporation EGO has an Earnings ESP of +9.48% and a Zacks Rank #2. You can see  the complete list of today’s Zacks #1 Rank stocks here.

 

Osisko Gold Royalties Ltd OR has an Earnings ESP of +11.11% and a Zacks Rank #2.

 

New Gold Inc NGD has an Earnings ESP of +133.33% and a Zacks Rank #3. 

 

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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

 

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