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Can Coty (COTY) Maintain Earnings Surprise Trend in Q3?
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Coty Inc. (COTY - Free Report) is slated to report third-quarter fiscal 2018 results on May 9, before the opening bell.
The question lingering in investors’ minds is whether this leading beauty company will be able to pull a positive earnings surprise in the to-be-reported quarter. In the last reported quarter, it delivered a positive surprise of 33.3%. The company delivered positive earnings surprises in three of the last four quarters, with an average earnings beat of 3.1%.
Let’s see how things are shaping up prior to the earnings announcement.
Strategic Buyouts & Initiatives to Drive Coty in Q3
Coty has been gaining from its focus on strategic buyouts, product launches and brand licenses to enhance the portfolio. The buyouts have been enhancing its portfolio, which is augmenting its top line. Notably, the company’s top line jumped 14.8% year over year in the last reported quarter, driven by contributions from ghd, Younique and Burberry. Additionally, revenues gained from robust growth in Luxury, and continued strength witnessed in the Professional segment.
The company remains optimistic about the ongoing synergies from buyouts, which have been solidifying its portfolio. Also, innovations and e-commerce operations are driving results. Given these factors and the year-to-date performance, the company expects modest net revenue growth in the second half of fiscal 2018. Management also expects healthy margin improvement over the second half, with maximum contributions from the fiscal fourth quarter.
For the fiscal third quarter, the Zacks Consensus Estimate for revenues of $2.19 billion reflects growth of 7.6% from the year-ago reported figure.
Further, Coty holds a strong position in fragrances and color cosmetics, and has a solid regional presence in the skin & body care. Also, management keeps introducing new products in response to shifting consumer preferences, and market new and established products through strategic advertising and merchandising.
Additionally, Coty is boosting its end-to-end digital-transformation efforts, including e-commerce across its divisions and regions. In the fiscal second quarter, Coty launched artificial-intelligence tools on boots.com in the UK and it also partnered with Amazon to launch “Let’s Get Ready” for the Amazon Echo Show. Apart from this, the buyout of leading online peer-to-peer social-selling platform, Younique, is a major evidence of Coty’s focus on connecting with customers through e-commerce initiatives.
Possible Deterrents That Might Impact the Quarter
However, Coty’s Consumer Beauty segment has been sluggish for the past few quarters. It has been struggling due to underlying challenges in North America, changing consumers’ preferences and a competitive environment. Evidently, organic sales at this segment dipped 1.3% in the fiscal second quarter on account of persistent softness in the global mass beauty market. Though the company is working toward improving the segment, the recovery is likely to take time. This remains a concern for Coty’s upcoming performance.
Consequently, the stock has declined 12.3% in the past month, wider than the industry’s fall of 8.9%. This reflects a negative sentiment on the stock, ahead of the earnings release.
Analysts polled by Zacks expect earnings of 12 cents per share for the to-be-reported quarter. Though consensus estimates have been stable in past 30 days, it reflects a decline of 20% from the year-ago quarter.
What Does the Zacks Model Unveil?
Our proven model does not conclusively show that Coty is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Coty has an Earnings ESP of -3.67% and a Zacks Rank #3. While the company’s Zacks Rank increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Stocks With Favorable Combinations
Here are some companies, which, according to our model, have the right combination of elements to deliver an earnings beat.
Flowers Foods, Inc. (FLO - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #3.
The J.M. Smucker Company (SJM - Free Report) has an Earnings ESP of +0.71% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Can Coty (COTY) Maintain Earnings Surprise Trend in Q3?
Coty Inc. (COTY - Free Report) is slated to report third-quarter fiscal 2018 results on May 9, before the opening bell.
The question lingering in investors’ minds is whether this leading beauty company will be able to pull a positive earnings surprise in the to-be-reported quarter. In the last reported quarter, it delivered a positive surprise of 33.3%. The company delivered positive earnings surprises in three of the last four quarters, with an average earnings beat of 3.1%.
Coty Inc. Price, Consensus and EPS Surprise
Coty Inc. Price, Consensus and EPS Surprise | Coty Inc. Quote
Let’s see how things are shaping up prior to the earnings announcement.
Strategic Buyouts & Initiatives to Drive Coty in Q3
Coty has been gaining from its focus on strategic buyouts, product launches and brand licenses to enhance the portfolio. The buyouts have been enhancing its portfolio, which is augmenting its top line. Notably, the company’s top line jumped 14.8% year over year in the last reported quarter, driven by contributions from ghd, Younique and Burberry. Additionally, revenues gained from robust growth in Luxury, and continued strength witnessed in the Professional segment.
The company remains optimistic about the ongoing synergies from buyouts, which have been solidifying its portfolio. Also, innovations and e-commerce operations are driving results. Given these factors and the year-to-date performance, the company expects modest net revenue growth in the second half of fiscal 2018. Management also expects healthy margin improvement over the second half, with maximum contributions from the fiscal fourth quarter.
For the fiscal third quarter, the Zacks Consensus Estimate for revenues of $2.19 billion reflects growth of 7.6% from the year-ago reported figure.
Further, Coty holds a strong position in fragrances and color cosmetics, and has a solid regional presence in the skin & body care. Also, management keeps introducing new products in response to shifting consumer preferences, and market new and established products through strategic advertising and merchandising.
Additionally, Coty is boosting its end-to-end digital-transformation efforts, including e-commerce across its divisions and regions. In the fiscal second quarter, Coty launched artificial-intelligence tools on boots.com in the UK and it also partnered with Amazon to launch “Let’s Get Ready” for the Amazon Echo Show. Apart from this, the buyout of leading online peer-to-peer social-selling platform, Younique, is a major evidence of Coty’s focus on connecting with customers through e-commerce initiatives.
Possible Deterrents That Might Impact the Quarter
However, Coty’s Consumer Beauty segment has been sluggish for the past few quarters. It has been struggling due to underlying challenges in North America, changing consumers’ preferences and a competitive environment. Evidently, organic sales at this segment dipped 1.3% in the fiscal second quarter on account of persistent softness in the global mass beauty market. Though the company is working toward improving the segment, the recovery is likely to take time. This remains a concern for Coty’s upcoming performance.
Consequently, the stock has declined 12.3% in the past month, wider than the industry’s fall of 8.9%. This reflects a negative sentiment on the stock, ahead of the earnings release.
Analysts polled by Zacks expect earnings of 12 cents per share for the to-be-reported quarter. Though consensus estimates have been stable in past 30 days, it reflects a decline of 20% from the year-ago quarter.
What Does the Zacks Model Unveil?
Our proven model does not conclusively show that Coty is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Coty has an Earnings ESP of -3.67% and a Zacks Rank #3. While the company’s Zacks Rank increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Stocks With Favorable Combinations
Here are some companies, which, according to our model, have the right combination of elements to deliver an earnings beat.
United Natural Foods, Inc. (UNFI - Free Report) has an Earnings ESP of +1.86% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowers Foods, Inc. (FLO - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #3.
The J.M. Smucker Company (SJM - Free Report) has an Earnings ESP of +0.71% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>