Analyst Note| Seth Goldstein, CFA |
International Flavors and Fragrances reported decent third-quarter results as higher costs partially offset sales growth in most segments. Management maintained its 2021 revenue guidance of 8% growth versus 2020, but reduced EBITDA margin guidance by 50 basis points to 21% because of higher costs. However, with many of IFF's sales being made on annual contracts, we expect the company will be able to fully pass along all cost inflation in 2022 and be able to raise prices again in 2023. As a result, once costs subside, we expect margins will sharply increase as higher prices will remain in place. As such, we have increased our outlook for 2022 and 2023. Having updated our model to reflect these changes, we raise our IFF fair value estimate to $145 per share from $140 as our increased medium-term forecast is slightly lower near-term outlook. Our wide-moat rating is unchanged.