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It has been about a month since the last earnings report for International Flavors (IFF). Shares have added about 2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is International Flavors due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
International Flavors Q3 Earnings Miss Estimates, Sales Rise Y/Y
International Flavors reported adjusted earnings of $1.04 per share in third-quarter 2024, missing the Zacks Consensus Estimate of $1.06 per share. However, the bottom line improved 17% from the year-ago quarter.
Including one-time items, the company reported earnings of 23 cents per share compared with the prior-year quarter’s 10 cents per share.
International Flavors’ net sales rose 3.7% year over year to $2.93 billion and surpassed the Zacks Consensus Estimate of $2.83 billion. On a comparable basis, currency-neutral sales were up 9% compared with last year’s quarter.
The upside was driven by double-digit growth in the Health & Biosciences and Scent segments, as well as high-single digit rise in Nourish and Pharma Solutions segments. In the third quarter, volume improved across all businesses and was up high-single digits.
Q3 Margins Improve Y/Y
In the reported quarter, International Flavors’ cost of goods sold was down 1.2% year over year to $1.87 billion. The gross profit improved 13.9% year over year to $1.05 billion. The gross margin was 36% compared with 32.8% in the year-ago quarter.
Research and development expenses increased 3% year over year to $162 million. The selling and administrative expenses rose 11% year over year to $495 million in the third quarter.
The adjusted operating EBITDA was $568 million, up 12.3% from the prior-year quarter’s $506 million. The adjusted operating EBITDA margin was 19.4% compared with the year-ago quarter’s 17.9%.
Segmental Performances
Revenues in the Nourish segment improved 2.6% year over year to $1.49 billion in the September-end quarter. On a comparable basis, currency-neutral sales were up 7%. The segment’s adjusted operating EBITDA was $206 million, up 15.7% year over year.
Revenues generated in the Health & Bioscience segment were $570 million compared with the year-earlier quarter’s figure of $518 million. Currency-neutral sales rose 12% on a comparable basis. The adjusted operating EBITDA was $173 million in the third quarter compared with $150 million in the prior-year quarter.
The Scent segment’s revenues were $613 million compared with the year-ago quarter’s $615 million. Currency-neutral sales improved 10%, driven by double-digit growth in Consumer Fragrance and Fine Fragrance and a high-single-digit increase in Fragrance Ingredients. The adjusted operating EBITDA fell 3.1% year over year to $127 million.
Revenues in Pharma Solutions were $256 million in the third quarter, up 8% year over year. Currency-neutral sales improved 8%, which was led by volume growth. The adjusted operating EBITDA rose 31.9% year over year to $62 million.