International Flavors & Fragrances: Earnings Preview

| About: International Flavors (IFF)

International Flavors & Fragrances Inc. (NYSE:IFF) is slated to release its fourth quarter and fiscal year 2011 results on Thursday, February 9. The current Zacks Consensus Estimates for the fourth quarter and fiscal year 2011 earnings per share (EPS) are 71 cents and $3.73, representing an annualized growth of 2.28% and 10.68%, respectively.

International Flavors’ earnings surprise average for the trailing four quarters is flat, with the company’s out performance in two quarters being offset by underperformance in another two.

Third Quarter Highlights

International Flavors & Fragrances’ third quarter results were impressive with adjusted earnings per share increasing by 2% to $1.00, but down from the Zacks Consensus Estimate of $1.04 per share.

Top line surged 6% year over year to $713.8 million and below the Zacks Consensus Estimate of $722 million. The increase in revenue was attributed to new business wins and higher sales volumes in all geographical regions.

Detailed discussion on the third quarter results can be found here: IFF 3Q Lags Estimate

Agreement/Magnitude of Estimate Revisions

In the last 30 days, out of about 10 analysts providing earnings per share estimates on IFF, one firm for both the fourth quarter and fiscal year 2012 and four analysts for 2012 lowered their estimates. There were no upward revisions in estimates.

Lack of magnitude in revisions, kept the estimates stable at 71 cents for the fourth quarter and at $3.73 for the fiscal year 2011. Estimate for 2012 went down by 3 cents, representing a year-over-year growth of 8.74%.

Our Take

Fourth quarter results will likely be overshadowed by expectation of severance and employee-related costs. The company, of late, has decided on 70 job cuts in its Fragrances division. Moreover, management’s cautious outlook for the quarter and anticipation of achievement of lower-end of the local currency sales growth target of 4%-6% raise concern for the financial results of the company.

We expect the company to perform in line with the market and hence maintain a Neutral recommendation.

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