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COTY Q1 Earnings In Line With Estimates, Sales Increase Y/Y
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Coty Inc. (COTY - Free Report) posted first-quarter fiscal 2023 results, with the top line surpassing the Zacks Consensus Estimate and the bottom line meeting the same. The metrics increased year over year.
The company gained from robust consumer demand for beauty products, mainly prestige fragrances, with estimated sell-out in its Prestige category growing in the low double digits. The company’s estimated sell-out in the Consumer Beauty division grew in the mid-to-high single digits. Coty registered solid LFL growth in both units, with Prestige growth restricted owing to industry-wide supply-chain pressures. In addition, the company is on track with its strategic pillars. Management reaffirmed its fiscal 2023 revenue and profit view.
Quarter in Detail
Coty reported adjusted earnings per share (EPS) of 11 cents, in line with the Zacks Consensus Estimate. The metric came ahead of our estimate, which was pegged at 10 cents per share. The bottom line increased from earnings of 8 cents per share reported in the year-ago quarter, courtesy of higher adjusted net income.
Coty’s net revenues came in at $1,390 million, up 1% year over year, including an adverse currency impact of 7%. The metric topped the Zacks Consensus Estimate of $1,379 million but lagged our estimate of $1,393.4 million. LFL revenues rose 9% on growth in the Prestige and Consumer Beauty business segments. The company’s LFL revenues included a nearly 2% unfavorable impact from its Russia business exit.
Adjusted gross margin came in at 64.1%, expanding from 63.4% reported in the year-ago quarter. The upside was supported by pricing and better trade spending. These were somewhat offset by COGS inflation.
Adjusted operating income came in at $249.6 million, rising from $200.5 million in the prior-year quarter on increased sales and gross profit along with lower depreciation expenses. The adjusted EBITDA in the quarter amounted to $307.9 million, up 11%. The adjusted operating margin in the first quarter came in at 18%, while the adjusted EBITDA margin was 22.2%.
Segment Results
Prestige: Net revenues in the segment inched down 1% to $863.4 million. The segment’s revenues were up 7% on an LFL basis, driven by strength in every region, reflecting recovery in most EMEA markets, Travel Retail and Latin America.
Consumer Beauty: Net revenues rose 5% year over year to $526.6 million. The segment’s LFL sales jumped 12%, with robust performance in color cosmetics, mass fragrances, skincare and body care. Management highlighted that every region generated LFL growth in the segment.
Region-Wise Results
Net revenues in the Americas increased 4% to $607.6million. LFL revenues were up 5%, driven by growth in Prestige and Consumer Beauty segments.
Sales in EMEA decreased 3% year over year to $609.3 million, while the figure grew 11% on an LFL basis. The unit’s performance gained from impressive growth across the Prestige and Consumer Beauty segment, driven by post-COVID re-opening.
Sales in the Asia-Pacific region grew 6% (up 12% at LFL) year over year to $173.1 million. The upside can be attributed to gains across Prestige and Consumer Beauty units. Almost all markets registered double-digit growth in the quarter. Although sales across China grew in the quarter, performance in the region continues to be hampered by COVID-related restrictions.
Other Updates
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $215.7 million, net long-term debt of $4,312.8 million and immediate liquidity of $1,926.1 million.
For the three months ended Sep 30, 2022, cash provided by operating activities amounted to $163.2 million.
Image Source: Zacks Investment Research
Outlook
Management continues to witness solid demand growth in almost all markets, especially in Prestige fragrances, as Coty is maintaining impressive launch activity across Prestige and Consumer Beauty segments. That said, the robust demand has been causing component shortages and restricted near-term growth.
Coty reiterates its fiscal 2023 outlook, which is inline with the medium-term growth algorithm. Adjusting for the impact of the Russia exit, management expects 6-8% LFL core revenue growth, in line with the medium-term growth algorithm. The company expects unfavorable currency rates to affect revenues by 6-8% in fiscal 2023.
For fiscal 2023, adjusted EBITDA is projected in the range of $955-$965 million, relatively in line with its medium-term growth target of 9-11% growth, adjusted for the Russia exit impact. Management anticipates fiscal 2023 adjusted EPS growth in mid-teens to 32-33 cents per share.
Taking into account solid fiscal first-quarter, the company expects first-half core business LFL revenue growth trends to be consistent with the annual growth target of 6-8%, with demand remaining robust in second-quarter. Management expects modest gross margin expansion during the fiscal second quarter and full year in spite of rising inflationary environment.
Price Performance
COTY’s shares have fallen 4.1% in the past three months compared with the industry’s 24.4% decline.
TreeHouse Foods, which manufactures and distributes private-label foods and beverages, sports a Zacks Rank #1 (Strong Buy) at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for THS’ current financial-year sales and EPS suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
e.l.f. Beauty, a cosmetic company, currently sports a Zacks Rank #1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and EPS suggests growth of 24.5% and almost 14.3%, respectively, from the year-ago period’s reported figures.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 47.3%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.
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COTY Q1 Earnings In Line With Estimates, Sales Increase Y/Y
Coty Inc. (COTY - Free Report) posted first-quarter fiscal 2023 results, with the top line surpassing the Zacks Consensus Estimate and the bottom line meeting the same. The metrics increased year over year.
The company gained from robust consumer demand for beauty products, mainly prestige fragrances, with estimated sell-out in its Prestige category growing in the low double digits. The company’s estimated sell-out in the Consumer Beauty division grew in the mid-to-high single digits. Coty registered solid LFL growth in both units, with Prestige growth restricted owing to industry-wide supply-chain pressures. In addition, the company is on track with its strategic pillars. Management reaffirmed its fiscal 2023 revenue and profit view.
Quarter in Detail
Coty reported adjusted earnings per share (EPS) of 11 cents, in line with the Zacks Consensus Estimate. The metric came ahead of our estimate, which was pegged at 10 cents per share. The bottom line increased from earnings of 8 cents per share reported in the year-ago quarter, courtesy of higher adjusted net income.
Coty’s net revenues came in at $1,390 million, up 1% year over year, including an adverse currency impact of 7%. The metric topped the Zacks Consensus Estimate of $1,379 million but lagged our estimate of $1,393.4 million. LFL revenues rose 9% on growth in the Prestige and Consumer Beauty business segments. The company’s LFL revenues included a nearly 2% unfavorable impact from its Russia business exit.
Coty Price, Consensus and EPS Surprise
Coty price-consensus-eps-surprise-chart | Coty Quote
Adjusted gross margin came in at 64.1%, expanding from 63.4% reported in the year-ago quarter. The upside was supported by pricing and better trade spending. These were somewhat offset by COGS inflation.
Adjusted operating income came in at $249.6 million, rising from $200.5 million in the prior-year quarter on increased sales and gross profit along with lower depreciation expenses. The adjusted EBITDA in the quarter amounted to $307.9 million, up 11%. The adjusted operating margin in the first quarter came in at 18%, while the adjusted EBITDA margin was 22.2%.
Segment Results
Prestige: Net revenues in the segment inched down 1% to $863.4 million. The segment’s revenues were up 7% on an LFL basis, driven by strength in every region, reflecting recovery in most EMEA markets, Travel Retail and Latin America.
Consumer Beauty: Net revenues rose 5% year over year to $526.6 million. The segment’s LFL sales jumped 12%, with robust performance in color cosmetics, mass fragrances, skincare and body care. Management highlighted that every region generated LFL growth in the segment.
Region-Wise Results
Net revenues in the Americas increased 4% to $607.6million. LFL revenues were up 5%, driven by growth in Prestige and Consumer Beauty segments.
Sales in EMEA decreased 3% year over year to $609.3 million, while the figure grew 11% on an LFL basis. The unit’s performance gained from impressive growth across the Prestige and Consumer Beauty segment, driven by post-COVID re-opening.
Sales in the Asia-Pacific region grew 6% (up 12% at LFL) year over year to $173.1 million. The upside can be attributed to gains across Prestige and Consumer Beauty units. Almost all markets registered double-digit growth in the quarter. Although sales across China grew in the quarter, performance in the region continues to be hampered by COVID-related restrictions.
Other Updates
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $215.7 million, net long-term debt of $4,312.8 million and immediate liquidity of $1,926.1 million.
For the three months ended Sep 30, 2022, cash provided by operating activities amounted to $163.2 million.
Image Source: Zacks Investment Research
Outlook
Management continues to witness solid demand growth in almost all markets, especially in Prestige fragrances, as Coty is maintaining impressive launch activity across Prestige and Consumer Beauty segments. That said, the robust demand has been causing component shortages and restricted near-term growth.
Coty reiterates its fiscal 2023 outlook, which is inline with the medium-term growth algorithm. Adjusting for the impact of the Russia exit, management expects 6-8% LFL core revenue growth, in line with the medium-term growth algorithm. The company expects unfavorable currency rates to affect revenues by 6-8% in fiscal 2023.
For fiscal 2023, adjusted EBITDA is projected in the range of $955-$965 million, relatively in line with its medium-term growth target of 9-11% growth, adjusted for the Russia exit impact. Management anticipates fiscal 2023 adjusted EPS growth in mid-teens to 32-33 cents per share.
Taking into account solid fiscal first-quarter, the company expects first-half core business LFL revenue growth trends to be consistent with the annual growth target of 6-8%, with demand remaining robust in second-quarter. Management expects modest gross margin expansion during the fiscal second quarter and full year in spite of rising inflationary environment.
Price Performance
COTY’s shares have fallen 4.1% in the past three months compared with the industry’s 24.4% decline.
Stocks to Consider
Some better-ranked stocks are TreeHouse Foods (THS - Free Report) , e.l.f. Beauty (ELF - Free Report) and Lamb Weston (LW - Free Report) .
TreeHouse Foods, which manufactures and distributes private-label foods and beverages, sports a Zacks Rank #1 (Strong Buy) at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for THS’ current financial-year sales and EPS suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
e.l.f. Beauty, a cosmetic company, currently sports a Zacks Rank #1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and EPS suggests growth of 24.5% and almost 14.3%, respectively, from the year-ago period’s reported figures.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 47.3%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.