On Friday, BofA Securities updated its stance on International Flavors & Fragrances (NYSE:IFF) shares, raising the price target to $99 from the previous $87, while maintaining a Neutral rating on the stock. The adjustment comes after International Flavors & Fragrances reported a robust first quarter, marked by organic growth and margin expansion.
The firm cited several reasons for the increased price target, including improved earnings estimates that now surpass the company's own guidance. The new earnings per share (EPS) forecast for 2024 stands at $4.05, up from $3.85.
Additionally, the valuation model reflects a higher multiple of 23.8 times earnings, up from 22 times, which is one standard deviation above the 10-year average of 21.5 times.
The revised price target also incorporates changes in the firm's discounted cash flow (DCF) analysis. The weighted average cost of capital (WACC) has been adjusted to 7.5% due to a higher equity value, while the terminal growth rate has been increased to 3% from 2.5%, reflecting a more optimistic long-term outlook for the company.
The analyst noted International Flavors & Fragrances' positive direction in 2024, including a dividend cut and the sale of its Pharma segment, which is expected to help the company achieve its leverage target upon completion.
The company has also been re-focusing its operations following two years of distractions related to the DuPont (NYSE:DD) deal and has made significant productivity gains year to date.
Despite the improved forecast and positive developments, the analyst believes that the stock's current valuation is fair, leading to the decision to reiterate a Neutral rating. This suggests that while the company's fundamentals have improved, the stock price may already reflect these advancements.
InvestingPro Insights
International Flavors & Fragrances (NYSE:IFF) has recently caught the attention of investors with its notable performance. According to InvestingPro data, the company boasts a significant market capitalization of $24.78 billion. While the P/E ratio currently stands at a negative -9.91, indicating that earnings are not covering the stock price, the company has shown a strong return over the last week with a 12.03% increase and an impressive 37.3% uptick over the last six months, aligning with the analyst's recognition of the company's robust first quarter.
Two InvestingPro Tips highlight the company's shareholder appeal: IFF has raised its dividend for 21 consecutive years and has maintained dividend payments for 54 consecutive years, which could be particularly attractive to income-focused investors. Moreover, the dividend yield is currently at 1.65%, a factor that might be taken into account when considering the stock's total return potential. Analysts have also revised their earnings upwards for the upcoming period, suggesting a positive outlook for the company's profitability.
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