We recently maintained a Neutral recommendation on New
International Flavors & Fragrances Inc.
The company is a creator and manufacturer of fragrance and
flavor products. Its operations are carried out primarily in the
United States and also internationally. Reviving global economy
seems to spur consumer spending which we believe will be a growth
driver for the flavors and fragrances industry.
Recently, IFF reported its fourth quarter financial results
posting an EPS of 74 cents, up 7% year over year and 3 cents above
the Zacks Consensus Estimate. The company's total revenue grew 2%
to $644 million, surpassing the Consensus Estimate of $639 million.
However, higher cost of sales lowered gross margin by 210 basis
points in the quarter.
To combat the headwinds from rising costs, the company recently
announced job cuts in the Fragrances division and other departments
of the company. Through this cost cutting measure IFF aims at
achieving roughly $9 million of pre-tax savings in 2012. Also,
responsibilities were realigned in the Functional Fragrances
division along with reallocation of resources from the developed
markets to the emerging markets. In the fiscal year 2011, emerging
markets grew by roughly 8% and represented 46% of the total
Moreover, new business wins, substantial geographical
diversifications, wide product lines, continuous accomplishments in
research and intense consumer insight are added advantages for the
company. In fiscal 2011, the company commenced construction of two
new manufacturing facilities in Asia and opened new offices in the
We believe IFF's results in the near term will be largely
influenced by higher raw material costs as well as intensifying
competition in the industry from other major players including
Danisco A/S and Firmenich SA.
The Zacks Consensus Estimate for the first quarter is $1.00,
representing a year-over-year decline of 2.59%. Estimates for the
fiscal years 2012 and 2013 are $4.06 and $4.38, reflecting annual
growth of 8.50% and 8.03%, respectively.
The company currently bears a Zacks Rank of #3, translating into
a short-term Hold rating.
INTL F & F (
): Free Stock Analysis Report
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