International Flavors and Fragrances Beat 2Q17 Estimates

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International Flavors and Fragrances Beat 2Q17 Estimates PART 1 OF 5

International Flavors and Fragrances Beat 2Q17 Estimates

International Flavors and Fragrances’ 2Q17 earnings

International Flavors and Fragrances (IFF) announced its 2Q17 earnings on August 8 after markets closed. The next day, IFF management held a press conference to discuss the results. In this series, we’ll discuss IFF’s 2Q17 earnings, revenues, reporting segment, and outlook after 2Q17 earnings.

International Flavors and Fragrances Beat 2Q17 Estimates

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IFF reported adjusted EPS (earnings per share) of $1.50, an increase of 2.0% on a year-over-year basis. In 2Q16, it reported adjusted EPS of $1.47. IFF managed to beat the analysts’ estimate of $1.45 adjusted EPS. The adjusted EPS exclude acquisition-related costs, integration-related costs, legal charges, and restructuring costs—which total $0.12 per share.

Driving factors

IFF’s adjusted earnings per share growth was primarily driven by acquisition growth from David Michael, Fragrance Resources, and PowderPure. Higher volumes and productivity measures also contributed to IFF’s adjusted EPS growth. IFF’s selling, general, and administrative (SG&A) expenses as a percentage of sales fell. In 2Q17, IFF reported SG&A expenses of $135.91 million, representing 16.10% of sales, compared to $132.78 million, representing 16.70% of revenue in 2Q16—a gain of 60 basis points on a year-over-year basis.

Further, IFF’s adjusted EPS received a boost from its share repurchases. In 2Q17, IFF repurchased 114,930 shares. At the end of 2Q17, IFF had diluted outstanding shares of 79.30 million, compared to 80.04 million in 2Q16.

Stock price reaction

Ths stock reacted positively to the earnings results. The stock gained 3.75% and closed at $139.68. On the same day, IFF’s peer Sensient Technologies (SXT) fell 1.0%.

EPS guidance

International Flavors and Fragrances made an upward revision to its adjusted EPS for fiscal 2017. Now, IFF expects fiscal 2017 adjusted EPS to be up 4.0%–5.0% over fiscal 2016’s adjusted EPS. The previous guidance was in the range of 3.5%–4.5%.

Investors can indirectly access IFF by investing in the PowerShares DWA Basic Materials Momentum Portfolio (PYZ), which has invested 2.40% of its portfolio in IFF. The fund’s other holdings include Chemours (CC) and FMC (FMC), which have weights of 4.60% and 4.50%, respectively, as of August 9.


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