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International Flavors (IFF) Tops Q1 Earnings & Sales Estimates

Zacks Equity Research

International Flavors & Fragrances Inc. IFF reported adjusted earnings of $1.57 per share in first-quarter 2019, beating the Zacks Consensus Estimate of $1.50. The bottom line declined 11.7% from the year-ago quarter’s $1.78. Strong legacy business performance and Frutarom aided double-digit growth in sales and adjusted operating profit in the reported quarter.

Including one-time items, earnings per share in the quarter came in at 96 cents compared with $1.63 recorded in the year-ago quarter.

In the reported quarter, International Flavors’ net sales were $1.3 billion, reflecting year-over-year jump of 39%. Further, the top-line figure surpassed the Zacks Consensus Estimate of $1.2 billion.

Operational Highlights

In the first quarter, International Flavors’ cost of goods sold rose 46% year over year to $766 million. Adjusted gross profit increased 31.2% year over year to $539.7 million. Adjusted gross margin came in at 41.5% compared with 44.2% witnessed in the year-ago quarter.
 
Research and development expenses flared up 15% year over year to $90.6 million. Adjusted selling and administrative expenses in the first quarter rose 37.6% year over year to $196.9 million. Adjusted operating profit increased 13% year over year to $204.7 million. Adjusted operating margin came in at 15.7% compared with the year-ago quarter’s 19.4%. 

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

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

Segmental Performances

Revenues in the Taste segment edged down 0.9%, year over year, to $444.6 million during the March-end quarter. On a constant-currency basis, revenues grew 3% year over year. Operating profit declined 2.7% year over year to $108.4 million.

Revenues generated from the Scent segment came in at $488.3 million, up 1.3% year over year. On a constant-currency basis, revenues improved 3% year over year. Operating profit dropped 8% year over year to $85.8 million.

In October 2018, International Flavors completed the acquisition of Frutarom Industries Ltd. The Frutarom segment’s revenues came in at $364.4 million and operating profit was $29 million during the January-March quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, International Flavors had cash and cash equivalents of $497.1 million, down from the $648.5 million recorded at the end of 2018. Long-term debt fell to $4,421 million as of Mar 31, 2019, from $4,504 million as of Dec 31, 2018.

International Flavors generated $47.2 million of cash from operating activities during the three-month period ended Mar 31, 2019, compared with cash usage of $11.4 million reported in the comparable period last year.

Capital invested in purchasing property, plant and equipment totaled $57.6 million during the three-month period ended Mar 31, 2019, surging 74.5% from the comparable period last year. Dividend paid totaled $77.8 million in the reported quarter.

Outlook
 
International Flavors has reaffirmed its guidance for 2019. Sales are projected in the range of $5.2-$5.3 billion. Adjusted earnings per share are expected in the band of $4.90-$5.10 and adjusted earnings excluding amortization are anticipated in the range of $6.30-$6.50. The company expects to achieve cost savings of $30-$35 million this year.
 
Share Price Performance

Over the past year, International Flavors’ shares have rallied around 8.9%, outperforming the industry’s gain of 7.1%.



Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the Basic Materials space are Sandstorm Gold Ltd SAND, Arconic Inc. ARNC and Arch Coal Inc. ARCH. While Sandstorm Gold sports a Zacks Rank #1 (Strong Buy), Arconic and Arch Coal carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sandstorm Gold has an expected earnings growth rate of 189% for 2019. The company’s shares have gained 8.3% in the past year.

Arconic has an estimated earnings growth rate of 3.5% for the current year. The company’s shares have appreciated 25.8% in a year’s time.

Arch Coal has a projected earnings growth rate of 5.49% for 2019. Its shares have rallied 22.3% over the past year.

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