International Flavors and Fragrances Earnings: Specialty Business Largely Returns to Growth

International Flavors and Fragrances' third-quarter earnings exemplified our thesis on the stock. In the near term, IFF's specialty businesses, which generated around 75% of revenue in 2022, continued to recover from customer inventory destocking and cost inflation that have weighed on results over the past 18 months. Flavors, fragrances, and health and biosciences, IFF's three highest-quality businesses, all generated growth on both a sequential and year-over-year basis. This is in line with our view that the impact on IFF's profits of inflation and volume declines due to customer inventory destocking would prove temporary. We expect a further recovery in these businesses in the fourth quarter and into 2024.