Ahead of the Bell: International Flavors

Analyst Jeffrey J. Zekauskas lifted his rating to "Neutral" from "Underweight," noting shares have declined 14 percent since mid-April as conditions in the fragrance business and consumer spending have weakened. However, the company still makes products used in staple items that consumers need, such as toiletries.

"Investors may find International Flavors & Fragrances a good choice in a tough market for cyclicals given its consumer roots," Zekauskas wrote in a client note.

However, Zekauskas said traffic has been weak in department stores--a large distribution outlet for high-end fragrances. Specifically, Saks Inc., Nordstrom Inc. and Neiman Marcus posted a decline in same-store sales in July and August. Same-store sales is an important retail metric measuring sales at stores open at least one year.

Meanwhile, Zekauskas said more consumers are choosing lower-cost basic food ingredients, instead of higher-cost packaged meals, which may "chip away" at the company's margins.

European grocery stores also say more consumers are buying at discount food stores instead of traditional chains, such as Marks & Spencer, which may pressure prices further, Zekauskas said. Competition will likely increase as China and India emerge as stronger players.