Ingredion (INGR)

Food ingredient solutions provider Ingredion (NYSE:INGR) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 2.9% year on year to $1.82 billion. Its non-GAAP profit of $2.75 per share was 4.8% below analysts’ consensus estimates.

Company Overview

Known for its ability to turn ordinary corn into thousands of different food ingredients, Ingredion (NYSE:INGR) transforms grains, fruits, vegetables and other plant-based materials into specialty starches, sweeteners and other ingredients for food, beverage and industrial markets.

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.

Ingredion competes with global agricultural processors and ingredient suppliers including Archer-Daniels-Midland (NYSE:ADM), Tate & Lyle (OTC:TATYF), Cargill (privately held), and Roquette (privately held), along with regional players like ALMEX in Latin American markets.

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.

With $7.26 billion in revenue over the past 12 months, Ingredion 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 accelerate sales, Ingredion likely needs to optimize its pricing or lean into new products and international expansion.

As you can see below, Ingredion’s demand was weak over the last three years. Its sales fell by 2% annually, a poor baseline for our analysis.

This quarter, Ingredion missed Wall Street’s estimates and reported a rather uninspiring 2.9% year-on-year revenue decline, generating $1.82 billion of revenue.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection suggests its newer products will fuel better top-line performance, it is still below average for the sector.

Ingredion has bad unit economics for a consumer staples company, giving it less room to reinvest and develop new products. As you can see below, it averaged a 24.2% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $75.77 went towards paying for raw materials, production of goods, transportation, and distribution.

Ingredion produced a 25.1% gross profit margin in Q3, in line with the same quarter last year. On a wider time horizon, Ingredion’s full-year margin has been trending up over the past 12 months, increasing by 2.4 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 an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Ingredion’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 12.7% over the last two years. This profitability was solid for a consumer staples business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Ingredion’s operating margin might fluctuated slightly but has generally stayed the same over the last year, highlighting the consistency of its expense base.

This quarter, Ingredion generated an operating margin profit margin of 13.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Ingredion reported adjusted EPS of $2.75, down from $3.05 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Ingredion’s full-year EPS of $11.22 to grow 1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Ingredion has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.5% over the last two years, quite impressive for a consumer staples business.

Taking a step back, we can see that Ingredion’s margin dropped by 7.8 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

Ingredion’s free cash flow clocked in at $172 million in Q3, equivalent to a 9.5% margin. The company’s cash profitability regressed as it was 13.5 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).

Although Ingredion hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 16.5%, higher than most consumer staples businesses.

Ingredion reported $921 million of cash and $1.8 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 $1.27 billion of EBITDA over the last 12 months, we view Ingredion’s 0.7× net-debt-to-EBITDA ratio as safe. We also see its $23 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 struggled to find many positives in these results. Its EBITDA missed and its revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $110.30 immediately after reporting.

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Ingredion.

Ingredion isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue has declined over the last three years. And while its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion, the downside is its cash profitability fell over the last year. On top of that, its projected EPS for the next year is lacking.

Ingredion’s P/E ratio based on the next 12 months is 9.7x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $124.33 on the company (compared to the current share price of $110.30).