International Flavors & Fragrances (NYSE:IFF) shares fell more than 22% in early Tuesday trading after the company missed analyst targets for the second quarter and lowered the full-year outlook.
IFF reported a profit per share of $0.86 on revenue of $2.9 billion, missing the expected earnings per share of $1.09 on revenue of $3.07B. Sales fell 11% year-over-year as the company’s largest business unit – Nourish – saw its revenue drop 14% YoY.
“Amid the current operating environment, IFF has performed near expectations across the majority of our portfolio, led by strong top- and bottom-line results in Scent and Pharma Solutions,” said IFF CEO Frank Clyburn.
“The continued customer destocking and volume pressures in the second quarter reflect the broader macroeconomic challenges facing our industry, and for IFF, this softness has been largely isolated in our Functional Ingredients business within Nourish.
As a result, IFF lowered its FY revenue outlook to $11.45B from $12.3B, with the new guidance coming in lower than the expected $12.18B. FY adjusted operating EBITDA is expected to be in the range of $1.85-2.0B versus the previous $2.34B.
The newly updated guidance reflects “the Company's expectation that volumes in the second half of 2023 will not recover as previously expected, driven particularly by continued customer destocking.”
Stifel analysts downgraded the IFF stock to Hold from Buy with a price target cut by $38 to $85 per share.
“Our downgrade mainly reflects the lack of visibility into improving volume trends, the company’s competitive position relative to peers, and lack of management credibility,” Astrachan said.
Wells Fargo analysts said the “magnitude of IFF's 2023 guidance reduction was much worse than expectations even though weaker demand/customer destocking was impacting others.”
“Coupled with high debt and history of misses, we expect a firm negative reaction,” the analysts wrote in a client note.