Zinger Key Points
- BofA upgrades IFF to Buy, citing strong Q3 results and improved innovation under new CEO, with higher 2025-2026 EBITDA and EPS estimates.
- IFF's sales rose 4% in Q3, driven by growth in Health, Scent, Nourish, and Pharma; analyst forecasts demand recovery in 2025-26.
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BofA Securities analyst Salvator Tiano upgraded International Flavors & Fragrances, Inc. IFF to Buy from Neutral, lowering the price forecast to $107 from $109.
Per the analyst, International Flavors has exceeded earnings expectations in all three quarters this year under its new CEO, while working to revitalize its R&D organization and product pipeline.
The company reported third quarter net sales of $2.93 billion, up 4% year-over-year, driven by strong performance in Health & Biosciences, Scent, Nourish, and Pharma Solutions. Volume grew high-single digits and improved across all businesses.
The analyst projects end-market demand to improve in 2025-26, following a period of pressure. Innovation is also regaining momentum after years of SKU reductions, although the analyst cautions not to overstate its impact given the current soft consumer environment.
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Improved results are projected ahead to enable earlier deleveraging, with International Flavors having more attractive opportunities for cash use beyond just paying down debt, Tiano writes. Additionally, the company’s valuation is seen as attractive compared to historical levels and European peers.
Although the company maintained its full-year outlook, Tiano highlights an additional $30 million in incentive compensation due to better-than-expected performance, which increases next year's tailwind to $130 million.
This, along with other factors, has led the analyst to raise the 2025 EBITDA estimate to $2.265 billion, up from $2.161 billion previously. The 2026 EBITDA estimate is now projected at $2.277 billion, the analyst highlights.
Tiano raised the FY25 EPS estimate to $4.85 from $4.60, and FY26 estimate to $5.05 from $4.85.
Price Action: IFF shares are trading higher by 1.99% to $91.95 at last check Friday.
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