AKAnomics Case Study: IFF Revenue Nowcast

Here we spotlight 2024Q3 revenue estimate for one of the 130 companies that AKAnomics Inc tracks – International Flavors and Flavors (IFF). IFF was among the 15 companies with AKAnomics revenue estimate well above consensus, and among one 23 companies flagged for a potential for a large disconnect from consensus revenues.  AKAnomics Inc estimated for IFF revenues to come in 5% above consensus,  close to the 3.7% reported revenue beat. This example is designed to illustrate how a novel approach for creating revenue estimates from a mosaic of global macro-economic and industry data can be quite powerful, and particularly valuable to the systematic and discretionary hedge fund analysts and PMs as a new “quantamental” approach to generating valuable signals.

Company Overview: International Flavors & Fragrances Inc. (IFF)

International Flavors & Fragrances Inc. (IFF) creates and supplies innovative solutions for food, beverage, health, biosciences, and fragrance industries. The company develops flavors, fragrances, and cosmetic actives, as well as ingredients for health and nutrition. IFF serves a broad range of markets including food and beverages, personal care, household products, pharmaceuticals, and agricultural solutions, and has a global footprint.

2024Q3 Revenue Surprise Analysis 

IFF delivered a strong 7% organic revenue growth in 2024Q2 on a currency neutral basis, and raised its full year revenue guidance. In its earnings call, it guided to a 2024Q3 revenue growth of -1%, with slowing organic revenue growth in the quarter. Not surprisingly, consensus 2024Q3 Y/Y revenue growth estimate started out around -1.5%, but moved up to 0% as the quarter progressed. AKAnomics Inc’s estimate started out at around 2% and improved to 5% as the quarter progressed, remaining 3-5% above consensus throughout the quarter.

The AKAnomics Inc Nowcasting mosaic 

AKAnomics Nowcasting approach follows over 8000 macro/industry data releases around the globe, in order to systematically assess the growth of hundreds of industries across different regions. The industries relevant for tracking IFF are food, beauty, and pharma across all the key regions. Our data suggested improving Y/Y growth in 24Q3 for food, and pharma volumes across North America and Europe, along with better pricing. Based on historical data, these suggested that IFF revenues were not only NOT slowing in the quarter, but in fact improving. Our assessment was built (systematically) from a mosaic of industry growth indexes we build based on regional retail sales, industrial production, import/exports, labor market, producer price indexes, and regional surveys, among others.

The Takeaway 

This case exemplifies how macroeconomic and industry data, when systematically analyzed and mapped into each company’s global businesses, can create an information mosaic not currently available to analysts/PMs, in turn providing a substantial informational edge that enhance decision-making processes and investment outcomes.