International Flavors & Fragrances Inc. (IFF, Financial) is slated to report its first-quarter results for fiscal 2015 on May 12, 2015. The company competes with businesses such as Symrise AG (SYIEF, Financial) and Givaudan SA (GVDNY, Financial) in the specialty chemicals market and companies such as PepsiCo. Inc. (PEP, Financial) and Coca-Cola Co. (KO, Financial).
IFF reported better-than-expected results for the fourth quarter of fiscal 2014 with 16.3% year-over-year growth in adjusted earnings of $1.07 a share, beating the consensus estimate of $1.03 a share. The company also logged 4% year-over-year growth in revenues (7% on a constant currency basis) to $756.1 million for the quarter, again beating the consensus estimate of $735 million on the back of growth across both operating segments of the company.
For the full fiscal 2014, IFF’s adjusted earnings came in $5.08 a share, up from $4.46 a share in fiscal 2013, and above the consensus estimate of $5.05 a share. Adjusted margins also grew on a year-over-year basis. Following the results, the company said it expected revenues and operating profits for FY2015 to come in line with its long-term targets, while it projected EPS growth in high-single digits for the new fiscal. Shares of IFF are up 9.2% since the company’s last earnings report.
Currency headwinds likely to drag revenues
While International Flavors & Fragrances did not experience much of a drag on its revenues in fiscal 2014 owing to currency headwinds, the same cannot be said for the first quarter of fiscal 2015. With the company sourcing revenues from both the domestic and international markets, IFF’s growth depends significantly on the economic conditions of nations it serves. Consequently, IIF’s Q1 results are likely to take a hit, given the global economy that is still reeling under a protracted slowdown, and a strong dollar.
However, while the company’s research and development wing is constantly trying to develop new, innovative compounds to satisfy customer needs, IFF is also working towards creating further avenues for future revenue generation. The company is focused on investing in acquisitions to gain access to new regions, customers as well as technologies. For instance, the company recently announced its successful acquisition of Ottens Manufacturing Co, Inc., a privately held business that specializes in flavors technologies. Ottens, which has a robust customer base in the UK, is expected to strengthen IFF’s trade in North America as well and contribute to incremental annual revenues to the tune of $60 million in fiscal 2015. Consequently, IFF’s diverse portfolio and product mix, along with new business acquisitions, is likely to help the company deliver solid results in the quarters ahead.
International Flavors & Fragrances also recently declared a regular quarterly cash dividend of 47 cents per share of the company’s common stock, an announcement that is likely to please investors in the run-up to the earnings report.
Final thoughts
International Flavors & Fragrances reported estimate-beating results for Q4 and full-fiscal 2014, although margins fell in the fourth quarter on a year-over-year basis. Consensus for the company’s earnings is $1.42 a share, up slightly from three months ago when it was $1.41 a share, while for the full fiscal; experts are looking at EPS of $5.51 a share. At the same time, revenues for the quarter are expected to go down by less than 1% year over year to $768 million while revenues for the full fiscal are expected to come in at $3.09 billion. The IFF shares have mostly traded in the $107-$122 range in the last three months, hitting a 52-week high of $123.08 in February 2015. While the International Flavors & Fragrances stock carries a price estimate of $119.69 a share and a "buy" guidance, a section of experts are also looking at a "hold" guidance, considering a lack of substantial growth avenues for the near-term.
