IFF — International Flavors & Fragrances Inc.

Q2 2026 continuing-operations sales of $1.95B and adjusted EBITDA of $408M both grew 6% currency-neutrally, with adjusted EPS of $0.82 beating expectations and sending shares up ~8.9%. The planned $3.8B sale of Food Ingredients to CVC and a $2.5B buyback program, including a $500M ASR, have reframed IFF as a higher-margin, lower-leverage compound story. Wall Street reflects this with a Buy consensus and $95 average target.

Raw GAAP quarterly data is heavily distorted and misleading. Revenues fell from roughly $2.9B per quarter in 2024 to $1.95B in Q2 2026 mainly because Food Ingredients moved to discontinued/held-for-sale classification in 2026, not because the core business collapsed. The GAAP income series is also polluted by large one-off charges in Q4 2023 ($2.6B net loss) and Q1 2025 ($1.0B net loss). On the adjusted continuing-operations basis management reports, Q2 2026 was an inflection: 6% currency-neutral sales and EBITDA growth, broad volume gains, and adjusted EBITDA margin around 21% ($408M on $1.95B sales). Gross margin in continuing operations was also ~44% in Q2 versus 37.5% on a distorted TTM basis. The underlying trend is stabilizing/improving, not deteriorating.

As of 2026-08-27, the reported 79.7x trailing P/E is not meaningful because TTM EPS of $1.13 includes impairments and one-off gains. Cleaner math: $86.85 divided by consensus forward EPS of $3.43 is about 25.4x forward earnings. That is reasonable for a business guiding to 4-8% adjusted EBITDA growth, 2-4% sales growth, and improving mix, though not cheap. P/S of 2.22x is slightly above the 5-year average of 2.11x, and the 'cheap vs. own history' label comes from a distorted 5-year P/E of 113x. Net-net: fair to modestly rich, not a discount.

The stock has run well ahead of trailing GAAP earnings because the market is pricing normalized post-divestiture earnings power, not the last twelve months. If IFF delivers the $3.4-$3.5 adjusted EPS the Street expects, the 2026-08-27 price is ~25x, which is digestible; buybacks and debt paydown can push EPS higher. But if adjusted EBITDA comes in below the $1.53-$1.60B guide or the Food Ingredients closing slips, the forward multiple compresses quickly. This is a stock that has already priced in a decent amount of execution.

As of 2026-08-27, RSI stood at 62.95 - positive momentum but not overbought. Price was 3.26% above its 20-day, 8.31% above its 50-day, and 17.35% above its 200-day moving average, so the trend is clearly upward but stretched. The stock is pressing against $89.32 resistance; chasing here has poor reward/risk. A pullback toward the 50-day moving average would offer a much better entry while preserving the bullish trend.

• Raw material, energy, and logistics costs are expected to inflate modestly in H2 2026, with pricing recovery lagging - a margin squeeze risk if volume growth fades.
• Middle East conflict and regional consumer softness may pressure fine fragrance volumes in Q3/Q4 2026.
• Interest-rate trajectory affects borrowing costs and the attractiveness of IFF's 2.1% dividend yield.
• Regulatory and antitrust approval conditions for the Food Ingredients sale to CVC could alter timing or net proceeds.
• Currency translation remains a swing factor for a global specialty-chemicals portfolio.

• Closing of the ~$3.8B Food Ingredients divestiture to CVC and deployment of the $500M accelerated buyback in H2 2026.
• Evidence of $100M in stranded-cost elimination on management's 12-month timeline and delivery of the $1.53-$1.60B adjusted EBITDA guidance.
• Continued volume-driven 6%+ currency-neutral growth in Taste, Scent, and Health & Biosciences through Q3/Q4.

• H2 2026 cost inflation outpacing pricing, pressuring the 20%+ adjusted EBITDA margin.
• Middle East geopolitical disruption and fine-fragrance volume normalization.
• Separation-related working capital headwinds and stranded costs eating into post-divestiture free cash flow.
• Historical capital-allocation missteps and past goodwill impairments argue for caution on aggressive buybacks/leverage assumptions.
• Execution risk: EBITDA and EPS targets depend on closing the sale, buyback timing, and volume continuing to hold.

IFF is a genuine turnaround with better underlying quality than the trailing GAAP data shows: the divestiture should leave a higher-margin business, and the debt paydown/buyback plan gives EPS a self-help tailwind. But at $86.85, with the stock 17% above its 200-day and already ~25x forward earnings, the market is paying up for that execution. This is a patient-accumulation-on-weakness idea, not a compelling chase at current levels.

I applied a 26.3x justified forward P/E to consensus forward EPS of $3.43 - a multiple consistent with IFF's post-divestiture ~21% adjusted EBITDA margin, 4-8% EBITDA growth, and deleveraging/buyback program - yielding $90.10. This was cross-checked against roughly 17x EV/EBITDA on the $1.57B adjusted EBITDA guidance midpoint, and it sits below the $95 Street target but modestly above the current $86.85 price.