IFF misses Q2 earnings as sales fall 29% on portfolio shift

International Flavors & Fragrances reported Q2 adjusted EPS of $0.82, missing the $1.14 consensus, as revenue fell 29.3% to $1.95 billion.

The company cut its full-year revenue guidance to $7.5 billion at the midpoint, down 29.6 percent from the prior $10.65 billion, and lowered EBITDA guidance to $1.57 billion, below the $2.11 billion analysts expected, according to the Aug. 4 release.

Metric	Actual	Consensus	Beat/Miss
Revenue	$1.95B	$2.61B	-25%
Adjusted EPS	$0.82	$1.12	-$0.30
Adjusted EBITDA	$408M	$529M	-22.9%

Organic revenue rose 6 percent year over year, beating estimates, while operating margin held at 8.1 percent. Free cash flow margin widened to 14.6 percent from 5.3 percent a year earlier, with $286 million generated in the quarter. The reported sales decline reflects the divestiture of lower-margin businesses as the company reshapes its portfolio toward higher-growth flavors and fragrances.

The miss reverses the prior quarter, when IFF delivered EPS of $1.25 against a $1.08 estimate, a 15.74 percent surprise. Over the last four quarters, the company has beaten consensus EPS twice and topped revenue estimates three times.

The board authorized a $2.50 billion share repurchase program, equal to as much as 12.1 percent of outstanding stock, and declared a quarterly dividend of $0.40, payable Oct. 9 to holders of record Sept. 18. Director Paul J. Fribourg bought 260,000 shares at $74.28 on June 1, lifting his stake 10.73 percent.

Shares opened at $80.95, up 0.5 percent, and have gained about 19.6 percent this year versus the S&P 500's 11 percent advance. Analysts hold a Moderate Buy rating with an average target of $91.16, MarketBeat data shows. Morgan Stanley rates the stock overweight with a $95 target, while Citigroup and Argus carry buy ratings at $88 and $85, respectively. Zacks assigns the stock a Rank #3 (Hold), reflecting mixed estimate revisions ahead of the release.

Peer Green Plains, an ethanol producer, reports results Aug. 6, with analysts expecting EPS of $0.65 on revenue of $528.9 million.

The guidance cut shows management expects the portfolio reshaping to weigh on reported sales through the year even as organic growth holds. Investors will watch the next earnings call for segment margins and the pace of the $2.50 billion buyback.

This article is for informational purposes only and does not constitute investment advice.