New York-based International Flavors & Fragrances Inc. (IFF) is a global leader in high-value ingredients and solutions for food and beverage, home and personal care, and health & wellness markets. With a market cap of $23 billion, the company’s operations span the Americas, Indo-Pacific, and EMEA regions, and command expertise in bioscience, chemistry, flavors, and fragrances.
International Flavors has lagged behind the broader market over the past year. IFF stock has gained 10.9% on a YTD basis and around 22% over the past year, underperforming the S&P 500 Index’s ($SPX) 24.7% gains in 2024 and 31.1% returns over the past year.
However, when compared to a sector-specific ETF, IFF has outperformed the Materials Select Sector SPDR Fund’s (XLB) gains of 9.4% in 2024 and 15.9% over the past 52 weeks.
IFF’s underperformance over the past month is primarily attributable to the massive 11.6% drop in stock prices in the trading session after the release of its Q3 earnings on Nov. 5 evening which was a stark contrast to the broader market rally observed on Nov. 6 after the announcement of Presidential elections’ results. Although the company reported a notable improvement in profitability with its adjusted EPS surging 16.9% year-over-year to $1.04, the improvement was primarily due to a base effect as IFF’s Q3 2023 earnings observed a massive decline of 34.6% year-over-year to $0.89 per share, down from $1.36 per share in Q3 2022. Given the company hasn’t surpassed 2022 earnings levels and missed analysts’ earnings estimates by 1.9%, it unsettled investor’s confidence.
On a positive note, International Flavor’s net sales grew 3.7% year-over-year to $2.9 billion which surpassed Wall Street’s topline expectations. Moreover, on a comparable currency-neutral basis, the company observed double-digit growth in the Health & Biosciences and Scent segments along with high single-digit growth in Nourish and Pharma Solutions segments. This growth was driven by the market recovery from prior year lows leading to notable volume growth across every division of the company.
For the current fiscal year, ending in December, analysts expect IFF to report a 24.6% year-over-year increase in adjusted EPS to $4.16. The company’s earnings surprise history is mixed. It surpassed analysts’ EPS estimates twice over the past four quarters while missing on two other occasions.
IFF stock has a consensus “Moderate Buy” rating overall. Among the 19 analysts covering the stock, 12 recommend “Strong Buy,” one advises “Moderate Buy,” five suggest “Hold,” and one advocates a “Strong Sell” rating.
This configuration is more bullish compared to a month ago, when 10 analysts recommended a “Strong Buy” rating.
On Nov. 12, Morgan Stanley (MS) analyst Lisa De Neve upgraded IFF to a “Buy” rating with a price target of $110, indicating a 22.5% upside potential from current price levels.
IFF’s mean price target of $103.95 represents a 15.8% premium to current price levels. Meanwhile, the Street-high target of $117 suggests a massive potential upside of 30.3%.
