On Thursday, Deutsche Bank maintained its Buy rating on shares of International Flavors & Fragrances (NYSE:IFF), with a price target of $90.00. The company recently announced a cut in its quarterly dividend from $0.80 per share to $0.40 per share, a move aimed at accelerating the reduction of its debt. Despite the lack of expected catalyst events, such as the sale of its Pharma Solutions division or a formal sale announcement during the Q4 earnings release, the firm remains optimistic about IFF's future financial goals.
International Flavors & Fragrances has not met the anticipated catalysts outlined by Deutsche Bank, including the sale of Pharma Solutions for $3.1B or an announcement of a sale process. Instead, the company revealed a dividend cut, which is intended to enable quicker deleveraging. As of December 30, 2023, IFF's net debt-to-EBITDA ratio stood at 4.7x, with a target to reduce it below 3x.
During the Q4 earnings conference call, IFF did not commit to reaching the net debt-to-EBITDA target by the end of 2024. However, the company expressed confidence in its ongoing divestiture efforts and the achievement of its financial targets. The new CEO, Erik Fyrwald, has prioritized portfolio optimization and balance sheet improvement.
Deutsche Bank's analyst highlighted the actions taken by IFF to enhance its business and the favorable trend in consumer demand. With the company's valuation at an attractive 14.5 times the estimated 2024 EBITDA, compared to 17.1 times for its Ingredients peers, the firm sees the current share price as appealing. This valuation represents 10% of the current share price with 1x equaling $8 per share.
The bank's reiteration of the Buy rating is based on the belief that IFF is likely to announce the sale of its Pharma Solutions sector soon, as part of its strategy to optimize its portfolio and improve its financial standing. Despite the setbacks, Deutsche Bank supports the company's ongoing deleveraging process and potential divestitures.
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