International Flavors Stock Is Worst Performer in the S&P 500. Here’s Why.

Text size

Shares of

International Flavors & Fragrances

were tumbling Tuesday after the scent and flavor maker cut its full-year sales outlook as customer demand weakened.

International Flavors

(ticker: IFF) said after the markets closed Monday that it now expects full-year sales of between $11.3 billion to $11.6 billion, which was a cut to previous guidance of $12.3 billion. The decrease was due to expectations that volumes in the second half of 2023 would no longer recover as previously anticipated.

The company also expects adjusted earnings before interest, taxes, depreciation and amortization for 2023 of between $1.85 billion to $2 billion, down from its previous guidance of $2.34 billion.

“We anticipate IFF shares trade down meaningfully on the result, and rightfully so, as the company has reduced 2023 guidance three times since its December 2022 investor meeting,” Stifel analyst Mark Astrachan said in a research note.

Astrachan downgraded shares of International Flavors to Hold from Buy and cut his price target to $85 from $123. He wrote that this downgrade was due to “the lack of visibility into improving volume trends,” and the company’s competitive position.

International Flavors didn’t immediately respond to a Barron’s request for comment.

International Flavors also reported second-quarter earnings of 86 cents a share on revenue of $2.93 billion. Analysts surveyed by FactSet were expecting earnings of $1.10 a share on revenue of $3.07 billion. In the same period last year, the company reported earnings of $1.54 a share on revenue of $3.31 billion.

“The continued customer destocking and volume pressures in the second quarter reflect the broader macroeconomic challenges facing our industry,” Chief Executive Frank Clyburn said in the earnings report.

The sales drop came despite an increase in prices, and was led by a decline in the company’s Nourish and Health & Biosciences segments. Mizuho analyst Christopher Parkinson, who rates the stock as Neutral with a $105 price target, said in a research note that the headwinds in the Nourish segment should “dominate investor discussions,” and will “significantly weigh on shares.”

Shares of International Flavors sank 19% to $65.01 Tuesday, and the stock was the worst performer in the S&P 500, according to FactSet. The stock has dropped 38% this year.

Write to Angela Palumbo at angela.palumbo@dowjones.com