IFF Remains in a Neutral Zone - Analyst Blog

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We recently maintained a Neutral recommendation on New York-based, International Flavors & Fragrances Inc. ( IFF ), a creator and manufacturer of fragrance and flavor products. Operations are carried out in the United States and internationally.  

The main causes that kept us on the sidelines were the company's first quarter 2012 results. Net earnings, which plummeted 3 cents year over year to $1.00 per share; however, were in line with the Zacks Consensus Estimate.

Revenues plummeted 1% year over year while higher cost of sales restricted gross margin expansion. To combat the headwinds from rising costs, the company resorted to cost reduction measures including job cuts in the Fragrances division and other departments of the company. This is expected to fetch $9 million in pre-tax savings in 2012.

Moreover, the company realigned responsibilities in the Functional Fragrances division and reallocated resources from the developed to the emerging markets.

Management anticipates that new business wins, substantial geographical diversifications, wide product lines, continuous accomplishments in research and intense consumer insight will benefit its results in the quarters ahead. Reviving global economy seems to spur consumer spending which we believe will be a growth driver for the flavors and fragrances industry.

The Zacks Consensus Estimate for the second quarter is $1.03, representing a year-over-year growth of 6.33%. Estimates for the fiscal years 2012 and 2013 are $4.01 and $4.35, reflecting annual growth of 7.14% and 8.67%, respectively.

The company currently bears a Zacks Rank of #3, translating into a short-term Hold rating.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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