Clean Label Trends And Sustainable Sourcing Will Expand Global Reach

Key Takeaways

• Expanding specialty portfolio, innovation, and sustainability focus are driving growth, higher margins, and new business opportunities across strategic food industry segments.
  
• Operational efficiencies, cost optimization, and targeted investments are boosting profitability and positioning the company for sustained international and long-term expansion.
  
• Global economic and trade instability, input cost pressures, and declines in legacy product demand threaten revenue and margin growth, heightening reliance on specialty ingredient expansion.

Catalysts

Manufactures and sells sweeteners, starches, nutrition ingredients, and biomaterial solutions derived from wet milling and processing corn, and other starch-based materials to a range of industries worldwide.

• Strong consumer and customer demand for health and wellness-focused, clean label, and sugar reduction solutions continues to drive double-digit growth in Ingredion's higher-value specialty portfolio, including clean label starches, high-intensity sweeteners, and protein isolates. This trend is expected to sustain above-average revenue and margin growth for the Texture & Healthful Solutions segment.
  
• Ongoing innovation and investments in R&D-especially in customized formulations and proprietary plant-based ingredients-are widening Ingredion's opportunities with small and medium-sized food brands and insurgent category disruptors, expanding future revenues and allowing for premium pricing that elevates net margins.
  
• Enhanced operational efficiencies, supply chain digitalization, and cost optimization initiatives have resulted in a structural step-change in segment margins (notably in Texture & Healthful Solutions), with management expecting these higher levels of profitability and operating leverage to persist, improving overall net margins and earnings.
  
• The company's commitment to sustainable ingredient sourcing and strong ESG credentials is attracting new business from large CPG customers seeking to reformulate for environmental and regulatory objectives. This alignment with evolving food industry standards opens new revenue streams and supports long-term margin resilience.
  
• Selective capital allocation to high-return organic growth projects and sustained share buybacks, coupled with further international expansion (even amidst temporary LATAM headwinds), position Ingredion to accelerate both top-line growth and EPS over the long run, as secular themes around a growing middle-class and dietary shifts in emerging markets resume momentum.

Ingredion Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ingredion's revenue will grow by 2.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 9.2% today to 9.0% in 3 years time.
• Analysts expect earnings to reach $696.0 million (and earnings per share of $10.82) by about September 2028, up from $676.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.9x on those 2028 earnings, up from 12.1x today. This future PE is lower than the current PE for the US Food industry at 19.5x.
• Analysts expect the number of shares outstanding to decline by 1.5% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Ingredion Future Earnings Per Share Growth

Risks

• Economic and currency volatility in key emerging markets, especially in LATAM (notably Argentina, Brazil, and Mexico), is contributing to declining volumes and negative foreign exchange impacts, which could lead to persistent revenue and earnings headwinds if macroeconomic weakness and currency depreciation continue.
  
• Ongoing tariff uncertainties and global trade friction create unpredictability for Ingredion and its customers, leading to conservative guidance, customer inventory rebalancing, and the risk of indirect impacts on demand that may pressure near-term and longer-term revenues and margins.
  
• The company continues to face price/mix headwinds across major business segments due to pass-through of lower corn and input costs, raising concerns that Ingredion's ability to maintain or grow top-line sales and net income will become more challenging if commodity cost deflation persists.
  
• Weaknesses in legacy product demand-such as industrial starches (impacted by soft box demand and tariffs) and high fructose corn syrup (HFCS; at risk from consumer trends toward natural or clean-label sweeteners)-put pressure on Ingredion's core revenues and increase the company's dependence on breakout growth from new, higher-margin specialty ingredients.
  
• While margins in Texture & Healthful Solutions have reached record highs, management acknowledged some results reflected exceptional one-time raw material procurement benefits and cost absorption, and they are signaling caution about sustaining current margin levels amid sourcing, transportation, and potential tariff challenges that could lead to net margin contraction in future periods.

Valuation

• The analysts have a consensus price target of $148.667 for Ingredion based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $168.0, and the most bearish reporting a price target of just $140.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.8 billion, earnings will come to $696.0 million, and it would be trading on a PE ratio of 15.9x, assuming you use a discount rate of 6.8%.
• Given the current share price of $127.07, the analyst price target of $148.67 is 14.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.