International Flavors & Fragrances Inc. (IFF – Free Report) is poised to gain from the end-market demand for flavors and fragrances. IFF’s initiatives are also expected to aid its performance. Improved volumes across all its segments in recent quarters will also drive the company’s performance.
Let us delve deeper and analyze the factors that make International Flavors stock worth holding on to at present.
Demand for Flavors & Fragrances Drives IFF’s Growth
International Flavors is well-poised to benefit from the demand for a variety of consumer products containing flavors and fragrances. Anticipated growth in emerging markets will likely be a key catalyst. Consequently, International Flavors is focused on gaining shares in emerging markets.
Backed by the company’s global presence, diversified business platform, broad product portfolio, and global and regional customer base, it will be able to capitalize on the expansion in flavors and fragrances markets, and deliver long-term growth. Focus on driving greater efficiencies throughout the business via cost and productivity initiatives, margin improvement, and acquisition-related synergies continues to drive profits.
International Flavors’ Focus on Growth Strategies
In December 2022, the company announced a strategic and financial vision, which, among others, consisted of a renewed growth-focus strategy, enhanced cost and productivity initiatives, and a redesigned operating model. It intends to transform its operating model into a more customer-centric and market-backed one. To this end, it will conduct business in three core end markets — Food and Beverage, Home and Personal Care, and Health.
To drive growth, IFF plans to step up its investment in high-return businesses such as Flavors, Fragrances, Health, Cultures and Food Enzymes . It continues to optimize its portfolio. The company has completed the sale of Microbial Control, and a portion of the Savory Solutions and Flavor Specialty Ingredients businesses.
In March 2024, International Flavors announced that it entered an agreement to sell its Pharma Solutions business, which would close in the first half of 2025. These endeavors will help International Flavors focus on its core business operations, strengthen its balance sheet and maximize shareholder returns.
IFF’s Improved Volumes Enhance Margins
In the third quarter of 2024, the company reported volume growth in the high-single digits, with broad-based contributions across each of its businesses. This is likely to persist and boost the company’s top line. International Flavors expects sales of $11.3-$11.4 billion for 2024. Its prior expectation was $11.1-$11.3 billion.
Volume is expected to increase 5-6%, an uptick from the prior mentioned 3-5%. This reflects improvements across all segments. Adjusted EBITDA is expected to be at the high end of $2.1-$2.17 billion.
Near-Term Concerns for International Flavors’ Stock
IFF continues to incur high raw material costs, and additional costs related to labor, shipping and cleaning. Despite its pricing actions and focused cost-reduction efforts, these factors are likely to dent margins for the balance of the year. International Flavors’ manufacturing expenses are expected to increase to support higher demand.
The company has experienced disruption in the supply of raw materials and transport logistics. Labor shortages and supply-chain issues might disrupt its production, impairing the company’s ability to meet demand. This will weigh on its top-line performance.
IFF Stock’s Price Performance
In the past year, the company’s shares have gained 3.9% against the industry’s 19.7% decline.
Image Source: Zacks Investment Research
International Flavors’ Zacks Rank & Stocks to Consider
IFF currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation (CRS – Free Report) , Fortuna Mining Corp. (FSM – Free Report) and Equinox Gold Corp. (EQX – Free Report) . CRS sports a Zacks Rank #1 (Strong Buy) at present, and FSM and EQX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has an average trailing four-quarter earnings surprise of 14.1%. The Zacks Consensus Estimate for CRS’s fiscal 2025 earnings is pegged at $6.61 per share. Its shares skyrocketed 162.7% last year.
Fortuna Mining has an average trailing four-quarter earnings surprise of 53.6%. The Zacks Consensus Estimate for FSM’s 2024 earnings is pegged at 48 cents per share. FSM’s shares gained 26.5% last year.
Equinox Gold has an average trailing four-quarter earnings surprise of 39.2%. The Zacks Consensus Estimate for EQX’s 2024 earnings is pegged at 43 cents per share. EQX’s shares gained 9.6% last year.
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