A month has gone by since the last earnings report for International Flavors (IFF). Shares have added about 6.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is International Flavors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
International Flavors Tops Q1 Earnings & Sales Estimates
International Flavors 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.
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%.
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, International Flavors has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
International Flavors has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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