International Flavors & Fragrances (IFF)

Flavor and fragrance producer IFF (NYSE:IFF) reported Q3 CY2025 results topping the market’s revenue expectations, but sales fell by 7.9% year on year to $2.69 billion. On the other hand, the company’s full-year revenue guidance of $10.75 billion at the midpoint came in 0.5% below analysts’ estimates. Its non-GAAP profit of $1.05 per share was 3.3% above analysts’ consensus estimates.

Company Overview

Responsible for the scents in your favorite perfumes and the flavors in your daily snacks, International Flavors & Fragrances (NYSE:IFF) creates and manufactures ingredients for food, beverages, personal care products, and pharmaceuticals used in countless consumer goods.

Ingredients, flavors, and fragrances companies supply essential components to food, beverage, personal care, and household product manufacturers. These firms develop proprietary formulations that enhance taste, scent, and texture, creating customer stickiness through specialized expertise and regulatory-approved ingredient portfolios. Tailwinds include growing consumer demand for natural and clean-label products, expansion in emerging markets, and innovation in plant-based and functional ingredients. However, headwinds persist from volatile raw material costs, particularly for agricultural and petrochemical inputs. Regulatory scrutiny over synthetic additives and fragrance allergens poses compliance challenges, while consolidation among major customers increases pricing pressure and negotiating leverage against suppliers.

IFF competes with other major global flavor and fragrance companies including Givaudan, DSM-Firmenich, Symrise, and in certain segments with food ingredient suppliers like Kerry, Archer-Daniels-Midland (NYSE:ADM), and Novonesis.

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $11.07 billion in revenue over the past 12 months, International Flavors & Fragrances is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. To expand meaningfully, International Flavors & Fragrances likely needs to tweak its prices, innovate with new products, or enter new markets.

As you can see below, International Flavors & Fragrances’s revenue declined by 4.3% per year over the last three years, a tough starting point for our analysis.

This quarter, International Flavors & Fragrances’s revenue fell by 7.9% year on year to $2.69 billion but beat Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to decline by 4.8% over the next 12 months, similar to its three-year rate. This projection is underwhelming and indicates its newer products will not accelerate its top-line performance yet.

International Flavors & Fragrances’s unit economics are higher than the typical consumer staples company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 35.7% gross margin over the last two years. Said differently, International Flavors & Fragrances paid its suppliers $64.28 for every $100 in revenue.

In Q3, International Flavors & Fragrances produced a 36.5% gross profit margin, in line with the same quarter last year. On a wider time horizon, International Flavors & Fragrances’s full-year margin has been trending up over the past 12 months, increasing by 1.3 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Although International Flavors & Fragrances was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 10% over the last two years. Unprofitable public companies are rare in the defensive consumer staples industry, so this performance certainly caught our eye.

On the plus side, International Flavors & Fragrances’s operating margin rose by 13.4 percentage points over the last year. Still, it will take much more for the company to show consistent profitability.

In Q3, International Flavors & Fragrances generated an operating margin profit margin of 8.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, International Flavors & Fragrances reported adjusted EPS of $1.05, up from $1.04 in the same quarter last year. This print beat analysts’ estimates by 3.3%. Over the next 12 months, Wall Street expects International Flavors & Fragrances’s full-year EPS of $4.37 to stay about the same.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

International Flavors & Fragrances has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.6% over the last two years, slightly better than the broader consumer staples sector.

Taking a step back, we can see that International Flavors & Fragrances’s margin dropped by 5.1 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

International Flavors & Fragrances’s free cash flow clocked in at $32 million in Q3, equivalent to a 1.2% margin. The company’s cash profitability regressed as it was 7.8 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

International Flavors & Fragrances’s five-year average ROIC was negative 4.2%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer staples sector.

International Flavors & Fragrances reported $621 million of cash and $6.05 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.12 billion of EBITDA over the last 12 months, we view International Flavors & Fragrances’s 2.6× net-debt-to-EBITDA ratio as safe. We also see its $228 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly International Flavors & Fragrances blew past analysts’ organic revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its adjusted operating income missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $67.34 immediately after reporting.

Updated: December 28, 2025 at 12:10 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own International Flavors & Fragrances, you should also grasp the company’s longer-term business quality and valuation.

We see the value of companies helping consumers, but in the case of International Flavors & Fragrances, we’re out. To kick things off, its revenue has declined over the last three years, and analysts don’t see anything changing over the next 12 months. And while its expanding operating margin shows the business has become more efficient, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its operating margins reveal poor profitability compared to other consumer staples companies.

International Flavors & Fragrances’s P/E ratio based on the next 12 months is 15.5x. This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $81.49 on the company (compared to the current share price of $67.34).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.