Argus Raises Price Target On International Flavors & Fragrances

International Flavors & Fragrances Inc IFF reported its Q2 results on August 8, with sales rising 3 percent from the year ago level and EPS beating the consensus.

Argus’ John Staszak maintained a Buy rating on the company, while raising the price target from $146 to $156.

Staszak mentioned that in local currency, the company’s net sales grew 4 percent, driven by currency-neutral growth in both the Fragrances and Flavors businesses.

International Flavors & Fragrances reported its EPS for the quarter at $1.47, up from $1.36 in 2Q15, and beating the consensus expectations by $0.06.

“We expect new business wins and product launches to result in higher valuation multiples going forward,” Staszak stated.

Outlook

The company benefits from high barriers to entry in the flavors and fragrances space, since the business needs meaningful investments in R&D and marketing.

International Flavors & Fragrances has been able to generate high returns on equity over the last several years.

Over the long term, the company targets 4-6 percent revenue growth in local currency, along with 7-9 percent growth in operating profit and EPS growth of over 10 percent.

“To this end, capital expenditures will increasingly emphasize expansion in emerging markets,” Staszak added.

The 2016 and 2017 EPS estimates have been raised from $5.50 to $5.60 and from $5.90 to $6.00, respectively.

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