International Flavors Hits 52-Week High: What’s Aiding the Stock?

International Flavors & Fragrances Inc. IFF shares scaled a new 52-week high of $104.17 on Friday before closing the session lower at $103.99.

IFF has a market capitalization of $26.6 billion. The company’s shares have gained 52.6%, outperforming the industry’s growth of 0.9% and the S&P 500 index’s rise of 26.9%.

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What’s Aiding International Flavors?

Demand for Flavors & Fragrances to Drive IFF’s Growth: The company is well-poised to benefit from demand for a variety of consumer products containing flavors and fragrances, going forward. Anticipated growth in emerging markets will likely be a key catalyst. Consequently, International Flavors is focused on gaining a share 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 through costs and productivity initiatives, margin improvement, and acquisition-related synergies continue to drive profits.

International Flavors’ Solid Q2 Performance Instills Confidence: The company reported adjusted earnings of $1.16 per share in second-quarter 2024, which beat the Zacks Consensus Estimate of $1.01. The bottom line improved 15% from the year-ago quarter.

Currency-neutral sales grew 7% year over year, led by growth in the Scent, Health & Biosciences and Nourish segments. The company reported volume growth in the high-single digits.

Growth Strategies Aid IFF Stock’s Margins: In December 2022, International Flavors announced a new strategic and financial vision, which, among other things, 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, the company 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 has continued to optimize its portfolio and completed the sale of Microbial Control, a portion of the Savory Solutions business and the Flavor Specialty Ingredients business.  The company closed the sale of the Cosmetic Ingredients business to Clariant for $810 million at the end of 2023.

The unit includes the Lucas Meyers Cosmetics and IBR brands, and operates six research and development and/or production sites globally. Recently, International Flavors announced that it entered an agreement to sell its Pharma Solutions business, which is on track to 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 return.

Improved Volumes Enhances IFF’s 2024 Outlook: The company’s Functional Ingredients  business is a leading global specialty food ingredients provider with a market leadership position in a broad portfolio of ingredients businesses, including Protein Solutions, Emulsifiers and Sweeteners, Core Texturant, and Cellulosic and Food Protection.

IFF is taking additional actions to rapidly improve the performance of its businesses,  which is expected to lead to low-single-digit comparable currency-neutral sales growth, in line with the market. In the second quarter of 2024, the company reported volume growth in the high-single digits. This is likely to persist and boost its top line.

International Flavors expects sales of $11.1-$11.3 billion. Its prior expectation was near the higher end of $10.8-$11.1 billion. Volume is expected to rise 3-5%, reflecting improvement across all segments. The company earlier expected volume of 0-3%. It anticipates pricing to favor sales by 1% year over year. Adjusted EBITDA is expected between $2.1 billion and $2.17 billion, up from the previously stated $1.9-$2.1 billion.

Zacks Rank & Other Stocks to Consider

International Flavors currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Consumer Staples sector are Ollie’s Bargain Outlet Holdings, Inc. OLLI, Edgewell Personal Care Co. EPC and Ingredion Incorporated INGR. These three companies currently have a Zacks Rank #2.

Ollie’s Bargain Outlet has an average trailing four-quarter earnings surprise of 7.9%. The Zacks Consensus Estimate for OLLI’s 2024 earnings is pegged at $3.28 per share. This indicates a 12.7% increase from the prior-year reported figure. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days. OLLI shares have gained 21.1% in the past year.

Edgewell Personal Care has an average trailing four-quarter earnings surprise of 88%. The Zacks Consensus Estimate for EPC’s 2024 earnings is pegged at $3.00 per share. This indicates a 17.2% increase from the prior-year reported figure. The consensus estimate for 2024 earnings has moved 3% north in the past 60 days. EPC shares have gained 4.5% in the past year.

The Zacks Consensus Estimate for Ingredion’s 2024 earnings per share is pegged at $9.95, indicating growth of 5.6% from the prior-year actual. Earnings estimates have moved 3% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 10.9%. INGR shares have gained 34.6% in the past year.

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