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COTY Up More Than 20% in 3 Months: Will Momentum Continue?
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Coty Inc. (COTY - Free Report) is benefiting from its focus on six strategic pillars aimed at sustainable growth. The beauty products provider is committed to strategic partnerships to enhance its brand portfolio. The company is committed to optimizing the overall cost structure.
The aspects mentioned above were evident in its first-quarter fiscal 2023 results, with the top and bottom line increasing year over year. Management expects fiscal 2023 revenues and profit to grow in line with a medium-term algorithm.
Coty’s shares have increased 22.5% in the past three months compared with the industry’s 5.7% growth.
Let’s delve deeper
Solid Q1 Results & Bright View
Coty’s first-quarter fiscal 2023 adjusted earnings per share (EPS) of 11 cents 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%. LFL revenues rose 9% on growth in the Prestige and Consumer Beauty business segments. Coty benefited from robust consumer demand for beauty products, mainly prestige fragrances, with estimated sell-outs 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’s fiscal 2023 outlook aligns 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. 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 the mid-teens to 32-33 cents per share.
Image Source: Zacks Investment Research
What’s Working Well for Coty?
Coty is benefiting from its focus on six strategic pillars aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability. With respect to stabilizing and growing its consumer beauty business, the company is on track with repositioning campaigns and disruptive advertising.
Coty has made several strategic partnerships to enhance its brand portfolio. On Nov 18, 2021, Coty signed a licensing agreement with Orveda — an ultra-premium skincare brand made in France. Prior to this, Coty entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will help Coty’s customers shop in the most convenient and personalized manner, online and offline. On Mar 3, 2021, the company signed a letter of intent to partner with LanzaTech — a pioneer in producing next-generation green and sustainable ingredients.
Coty is committed to undertaking initiatives to accelerate sales and profit growth, deleverage its balance sheet and simplify its capital structure. In December 2022, Coty announced the sale of the Lacoste fragrance license back to the latter in a mutual deal. The move will help Coty focus on its biggest fragrance licenses alongside speeding up its deleveraging plan via the sale proceeds.
Will Hurdles be Countered?
Coty continues to witness dynamic inflation and a supply chain environment. The global supply-chain-related challenges coupled with robust demand for fragrances is causing industry-wide supply constraints for key fragrance components. Moreover, intermittent COVID-induced lockdowns across China pressured the company’s performance in the quarter. The company expects the cost of goods sold inflation to remain at nearly 2% in fiscal 2023.
That being said, the Zacks Rank #3 (Hold) company is on track to mitigate the impact of inflation via cost savings. It is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. In the first quarter of fiscal 2023, Coty delivered savings of more than $20 million fueled by fixed cost and gross margin initiatives. Management continues to deliver savings of $170 million in fiscal 2023.
Inter Parfums currently sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 15%. IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings per share suggests growth of 16.6% and 23.6%, respectively, from the year-ago reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.8% and 3.8%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.
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COTY Up More Than 20% in 3 Months: Will Momentum Continue?
Coty Inc. (COTY - Free Report) is benefiting from its focus on six strategic pillars aimed at sustainable growth. The beauty products provider is committed to strategic partnerships to enhance its brand portfolio. The company is committed to optimizing the overall cost structure.
The aspects mentioned above were evident in its first-quarter fiscal 2023 results, with the top and bottom line increasing year over year. Management expects fiscal 2023 revenues and profit to grow in line with a medium-term algorithm.
Coty’s shares have increased 22.5% in the past three months compared with the industry’s 5.7% growth.
Let’s delve deeper
Solid Q1 Results & Bright View
Coty’s first-quarter fiscal 2023 adjusted earnings per share (EPS) of 11 cents 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%. LFL revenues rose 9% on growth in the Prestige and Consumer Beauty business segments. Coty benefited from robust consumer demand for beauty products, mainly prestige fragrances, with estimated sell-outs 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’s fiscal 2023 outlook aligns 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. 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 the mid-teens to 32-33 cents per share.
Image Source: Zacks Investment Research
What’s Working Well for Coty?
Coty is benefiting from its focus on six strategic pillars aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances; accelerating luxury fragrances and setting up Coty as a core player in prestige make-up; establishing a skincare portfolio in prestige and mass channels; strengthening e-commerce and Direct-to-Consumer (DTC) capabilities; growing presence in China via Prestige and certain Consumer Beauty brands; as well as setting Coty as an industry leader in sustainability. With respect to stabilizing and growing its consumer beauty business, the company is on track with repositioning campaigns and disruptive advertising.
Coty has made several strategic partnerships to enhance its brand portfolio. On Nov 18, 2021, Coty signed a licensing agreement with Orveda — an ultra-premium skincare brand made in France. Prior to this, Coty entered into a multi-channel agreement with Perfect Corp. — a well-known beauty tech solutions provider. The partnership will help Coty’s customers shop in the most convenient and personalized manner, online and offline. On Mar 3, 2021, the company signed a letter of intent to partner with LanzaTech — a pioneer in producing next-generation green and sustainable ingredients.
Coty is committed to undertaking initiatives to accelerate sales and profit growth, deleverage its balance sheet and simplify its capital structure. In December 2022, Coty announced the sale of the Lacoste fragrance license back to the latter in a mutual deal. The move will help Coty focus on its biggest fragrance licenses alongside speeding up its deleveraging plan via the sale proceeds.
Will Hurdles be Countered?
Coty continues to witness dynamic inflation and a supply chain environment. The global supply-chain-related challenges coupled with robust demand for fragrances is causing industry-wide supply constraints for key fragrance components. Moreover, intermittent COVID-induced lockdowns across China pressured the company’s performance in the quarter. The company expects the cost of goods sold inflation to remain at nearly 2% in fiscal 2023.
That being said, the Zacks Rank #3 (Hold) company is on track to mitigate the impact of inflation via cost savings. It is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. In the first quarter of fiscal 2023, Coty delivered savings of more than $20 million fueled by fixed cost and gross margin initiatives. Management continues to deliver savings of $170 million in fiscal 2023.
3 Solid Staple Picks
Some other top-ranked stocks are Inter Parfums (IPAR - Free Report) , Conagra Brands (CAG - Free Report) and Campbell Soup (CPB - Free Report) .
Inter Parfums currently sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 15%. IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings per share suggests growth of 16.6% and 23.6%, respectively, from the year-ago reported numbers.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.8% and 3.8%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.