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International Flavors (IFF) Q3 Earnings: What's in the Cards?

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International Flavors (IFF) Q3 Earnings: What's in the Cards?

International Flavors & Fragrances (IFF) will gain on cost cutting efforts, productivity initiatives, acquisitions and growth in global market for flavors and fragrances in third-quarter 2018.

International Flavors & Fragrances Inc. IFF is scheduled to report third-quarter 2018 results after the closing bell on Nov 5.

In the last reported quarter, the company’s earnings of $1.66 per share surpassed the Zacks Consensus Estimate by 3%. The company has delivered better-than-expected results in the trailing four quarters, recording a positive average earnings surprise of 5.32%.

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 -1.79%. 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 Q3 Results

In the to-be-reported quarter the company will benefit from favorable markets and acquired businesses Moreover, the company's exhaustive research and development wing focuses on the development of new and innovative compounds will prove beneficial in the to-be-reported quarter. The Zacks Consensus Estimate for total revenues is pegged at $891 million, projecting year-over-year growth of 2%.

In the Flavors segment, the company continues to witness strong new wins in beverage, dairy, and sweet categories. Further, Tastepoint continues to deliver strong results, improving in strong double digits in the first half of 2018. It is anticipated to drive results in the third quarter. The Flavors segment’s Zacks Consensus Estimate for revenues is pegged at $419 million for the third quarter of 2018. This projection reflects year-over-year growth of 27% for the segment. It is expected to report an operating profit of $98 million in the to-be-reported quarter, up 8% from the prior year reported figure. This is likely to be driven by volume growth and benefits from productivity initiatives.

In addition to growing population and rising product demand, the company’s Fragrances segment will gain from new business wins and more businesses from existing customers. Demand for Fragrance Compounds and Ingredients remain strong. The Fragrances segment’s Zacks Consensus Estimate for revenues is pegged at $474 million for the third quarter of 2018. This projection indicates improvement of 2% over the $463 million recorded in the year-ago quarter. The segment’s operating profit is expected to decline 6% year over year to $88 million.

Meanwhile, 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. Nevertheless, the company’s focus to drive greater efficiencies across the business through costs and productivity initiatives will aid margins. Favorable taxes also continue to support overall profitability.

The Zacks Consensus Estimate for earnings is pegged at $1.54 for the third-quarter 2018, reflecting year-over-year growth of 4.8%.

Price Performance

In the last year, the company’s shares have dipped 2.5%, against the industry’s decline of 7.8%.

Stocks to Consider

Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.

Arch Coal Inc. ARCH has an Earnings ESP of +3.38% and a Zacks Rank #1. Its shares have gone up 22% in a year’s time.  You can see the complete list of today’s Zacks #1 Rank stocks here .

CF Industries Holdings, Inc. CF has an Earnings ESP of +34.87% and a Zacks Rank #1. Its shares have gone up 26% in a year’s time.

Steel Dynamics, Inc. STLD has an Earnings ESP of +1.17% and a Zacks Rank #3. Its shares have gone up 4% in a year’s time.

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