IFF International Flavors and Fragrances Inc

New York-based, International Flavors & Fragrances Inc. (IFF) reported decent second quarter 2012 results. Though the company’s revenue had but a marginal jump due to impacts from a negative foreign currency translation, its bottom-line grew 11%. The company’s near-term results are expected to improve.

Let’s take a brief look at the company’s financials for the second quarter 2012:

Earnings Review

The fragrances and flavors manufacturer posted an 11% year-over-year growth in earnings, which settled at $1.08 per share. Its results surpassed the Zacks Consensus Estimate of $1.02 by roughly 5.9%.

Revenue grew 0.8% or 4% on a constant currency basis to $721.3 million. Results in the quarter were driven by favorable performances at the Flavors division that grew 8% year over year on a constant currency basis.

Please follow the link for further details on International Flavors & Fragrances second quarter 2012 financials: IFF Posts Upbeat 2Q

Agreement/Magnitude of Estimate Revisions

Both the impact of second quarter 2012 results and management’s outlook have triggered an estimate revision for the company in either direction. In the last 7 days, of the 10 estimates for 2012, 4 were revised upwards while 3 were lowered by the analysts covering the stock. Roughly a similar trend followed for 2013, as out of the 10 estimates, 3 were increased while 4 were lowered.

For the third quarter of 2013, from a total of 7 estimates, there were 5 negative revisions.

As for magnitude of estimate revision, in the last 7 days, estimate for the third quarter decreased from $1.11 to $1.07 per share. For 2012, estimate increased by a cent to $3.99 while for 2013 estimate decreased by a cent to $4.32.

The Zacks Consensus Estimates represents a year-over-year growth of 7.0% for third quarter, 6.6% for 2012 and 8.3% for 2013.

Our Take

Negative foreign currency translation restricted revenue growth that would have flourished with a healthy performance reported by the Flavors division. Gross margin improved and are expected to improve further based on lower raw material cost increases, favorable pricing and manufacturing efficiencies. Besides, expansion might get restricted due to persistent weakness in Western Europe as well as in the company’s Fragrances division.  

Currently, we maintain a Neutral recommendation on International Flavors & Fragrances. The stock also bears a Zacks #3 (Hold) Rank.

About Zacks Earnings Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

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