Thursday, KeyBanc Capital upgraded International Flavors & Fragrances Inc. (IFF) shares to Buy from Hold with a price target of $39.
Analyst Michael Sison said that based on confidence that his 2009 EPS outlook remains intact, noticeable underperformance relative to the specialty chemical sector and its major consumer products customers, comfort that the Flavors segment can generate some growth this year, and the potential for Fine Fragrances to bottom soon, he upgraded the stock to Buy.
The analyst believes his 2009 EPS estimate of $2.50 remains intact although he now sees lower interest expense and taxes offsetting weaker Fragrance results. The analyst suspects Flavor segment growth is sustainable and he now is looking for 2% year-over-year growth in 2009 led by new product wins.
The analyst senses inventory destocking is starting to slow. While sales are expected to decline 20%+ in 2009 vs. 2008, IFF is doing a good job offsetting its highest profitability business with cost savings and new product wins in Functional Fragrances.
The analyst senses that cost savings and modest 2% sales growth in 2010 should get EPS back to $2.75 vs. an estimated $2.50 in 2009, which is good progress from its last trough earnings level at $1.40 in 2001.
Currently, IFF is up $0.11 or 0.37% and trading at $30.20.
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