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Why Most Analysts Recommend ‘Holds’ on IFF’s Stock

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Dec. 29 2016, Updated 9:08 a.m. ET

Analysts’ recommendations for IFF

As of December 26, 2016, 13 brokerage firms are actively tracking International Flavors and Fragrances’ (IFF) stock. About 42% of analysts have recommended “buys” on the stock, while 58% of analysts have recommended “holds,” and none have recommended “sells” on the stock.

Analysts’ consensus indicates a 12-month target price of ~$136.50 for International Flavors and Fragrances, implying a return potential of 15.4% based on its closing price of $118.24 as of December 23, 2016. Since October, analysts have decreased IFF’s target price from $148.00 to its current target price of $136.50. The rise in its target price was primarily driven by lower-than-expected 3Q16 earnings.

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Why are analysts recommending “holds” on IFF?

Although IFF posted lower-than-expected results in 3Q16, a majority of analysts are recommending “holds” on the stock, primarily due to higher 2016 revenue guidance reflecting growth in the range of 2.5%–3.5%, compared to its earlier guidance of 1.5%–2.5%. IFF has also initiated a few acquisitions to achieve its 2020 vision of improving the sales by $500 million to $1 billion.

Peer comparison

As of December 26, 2016, four brokerage firms are actively tracking Sensient Technologies (SXT). About 50.0% of them have recommended “buys” on the stock, 50% of the analysts have recommended “holds,” and no firms have recommended “sells.” Analysts’ consensus estimate indicates a 12-month target price of $82.30, implying a return potential of ~5.0% from its closing price of $78.39 on December 26, 2016

Praxair (PX) is actively tracked by 20 brokerage companies. About 40% of them have recommended “buys” on the stock, whereas 55% have recommended “holds,” and the remaining 5% have recommended “sells.” Analysts’ consensus estimate indicates a 12-month target price of $125 for the stock, implying a return potential of ~6.3% from its closing price of $117.59 on December 26, 2016.

Air Products and Chemicals (APD) is tracked actively by 21 brokerage firms. About 57% of them have recommended “buys” on the stock, whereas 38% have recommended “holds,” and the remaining 5% have recommended “sells.” Analysts’ consensus estimate indicates a 12-month target price of $152.20, implying a return potential of ~3.3% from its closing price of $147.32 on December 26, 2016.

Investors can hold IFF by investing in the Guggenheim S&P 500 Equal Weight Materials ETF (RTM), which has invested 3.9% of its portfolio in IFF. In the next article, we’ll look at IFF’s latest valuations in comparison with those of its peers.

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