Analyst Note| Seth Goldstein, CFA |
Ingredion reported decent third-quarter results, as operating income fell 9% year on year versus the prior-year quarter. The decline occurred despite a 17% sales growth as cost increases grew faster. However, we anticipated higher costs weighing on profits for the remainder of the year. Since Ingredion can renegotiate the bulk of its contracts during the fourth quarter, we think it will be able to raise prices to offset much of its cost inflation beginning in 2022. With our long-term outlook intact, we maintain our $120 per share fair value estimate and narrow moat rating.