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Encouraging third quarter results and expectations of continued growth have kept overall sentiments positive for International Flavors & Fragrances Inc. (IFF), following its earnings release on November 4, 2010.

Earnings Review
International Flavors & Fragrances’ third quarter 2010 adjusted net income soared 21.0% year over year to $79.1 million, or 98 cents per share compared with $65.4 million or 82 cents per share in the third quarter of 2009. Earnings per share surpassed the Zacks Consensus Estimate of 86 cents.

GAAP EPS in the quarter was 95 cents versus 66 cents in the year-ago quarter. It included 3 cents charge related to the company’s ongoing restructuring activities in Europe.

Net sales were $673.3 million, up 10.0% year over year from $612.6 million in the comparable quarter of 2009 and 13.0% on a constant currency basis. The results exceeded the Zacks Consensus Estimate of $644.0 million. The increase in revenue was attributable to new business wins and higher sales volumes in all geographical regions.

Detailed discussion on the earnings release can be found here.

Agreement of Analysts
Following the company’s earnings release, estimates for International Flavors’ were increased by the majority of analysts covering the stock. In the last 7 days, earnings estimates for the fiscal year 2010 and 2011 were increased by 7 analysts while 6 analysts hiked their fourth quarter estimates.

Positive revision incorporates the company’s impressive third quarter results and expectations of such performances in the quarters ahead. New business wins, tremendous geographical diversification and product mix are expected to be the prime growth drivers.

Magnitude of Estimate Revisions
Following the company’s third quarter earnings release, in the last 7 days, EPS estimates for fiscal year 2010 and 2011 inched up to $3.36 for the fiscal year 2010 and $3.71 for the fiscal year 2011, representing a year-over-year growth of 24.3% and 10.6%, respectively.

Estimate for the fourth quarter moved up from 68 cents to 72 cents, representing a year-over-year growth of 14.74%.

Outperform Recommendation
International Flavors & Fragrances is a leading creator and manufacturer of flavor and fragrance compounds. With the economy reviving from the global crisis, consumer spending is seen to be accelerating, a positive driver for the flavors and fragrances industry.

Although there are concerns over subsiding inventory restocking in the near future, International Flavors & Fragrances is in a position to derive its growth momentum from its continuous accomplishments in research and intense consumer insight. We believe the company’s strategy to reduce operating costs will enhance its margin levels going forward. In addition, growing new business wins and regional diversification support revenue growth.

Anticipating out performance relative to the market, we have upgraded the stock from Neutral to an Outperform recommendation.