Back to top

Image: Bigstock

Why Is Coty (COTY) Down 0.3% Since Last Earnings Report?

Read MoreHide Full Article

It has been about a month since the last earnings report for Coty (COTY - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Coty due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Coty Inc. Beats Earnings Estimates in Q3, Raises 2023 Guidance

Coty Inc. posted third-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net revenues and earnings increased year over year. The company saw sales growth, driven by gains from Prestige & Consumer Beauty business. Taking into account rising prestige fragrances demand, retailer restocking and the company’s initiatives, management raised its fiscal 2023 revenues and earnings per share (EPS) guidance.

Quarter in Detail

Coty reported adjusted EPS of 19 cents, surpassing the Zacks Consensus Estimate of 3 cents a share. The metric also came ahead of our estimate, which was pegged at 2 cents per share. The bottom line increased from earnings of 3 cents per share reported in the year-ago quarter, courtesy of higher adjusted net income.

Coty’s net revenues came in at $1,288.9 million, up 9% year over year, including an adverse currency impact of 4% and negative impact from the Russia exit of nearly 3%. The metric surpassed the Zacks Consensus Estimate of $1,222.6 million and our estimate of $1,180.2 million. LFL revenues rose 15% on growth in the Prestige and Consumer Beauty business segments.

Adjusted gross margin came in at 62.9%, contracting from 64.6% reported in the year-ago quarter. The downside can be attributed to step-up in COGS inflation to over 2% of sales and unfavorable currency rates among other reasons. However, gains from favorable mix and supply chain productivity were hurdles on the way.

Adjusted operating income came in at $122.7 million, rising 8% from $113.6 million in the prior-year quarter on lower depreciation expenses. The adjusted EBITDA in the quarter amounted to $181.9 million, in line with the year-ago quarter’s level. The adjusted operating margin in the third quarter came in at 9.5%.

Segment Results

Prestige: Net revenues in the segment went up 10% to $799.7 million. The segment’s revenues were up 16% on an LFL basis, on solid double-digit growth in almost every market, with significant momentum in Latin America and Travel Retail.

Consumer Beauty: Net revenues rose 6% year over year to $489.2 million. The segment’s LFL sales jumped 12%, with robust performance in color cosmetics, skincare and body care.

Region-Wise Results

Net revenues in the Americas increased 13% to $543.8 million. LFL revenues were up 15%, driven by growth in Prestige and Consumer Beauty segments.

Sales in EMEA grew 7% year over year to $587.6 million, while the figure increased 18% on an LFL basis. The unit’s performance gained from impressive growth across the Prestige and Consumer Beauty segment, with solid momentum in regional Travel Retail.

Sales in the Asia-Pacific region fell 0.4% (up 4% at LFL) year over year to $157.5 million. The company’s Prestige business generated solid growth with almost every market registering double-digit growth. However, Prestige and Consumer Beauty business declined in China.

Other Updates

The company ended the quarter with cash and cash equivalents of $245 million and net long-term debt of $4,225 million.

For the nine months ended Mar 31, 2023, cash provided by operating activities amounted to $520.8 million.


Management continues to witness solid demand growth in almost all markets, especially in Prestige fragrances, as Coty maintains impressive launch activity across Prestige and Consumer Beauty segments.

Adjusting for the impact of the Russia exit, Coty anticipates fiscal 2023 LFL revenues for the core business to increase 9-10%. Earlier, the company had expected the metric to increase 6-8% in fiscal 2023. Management expects a low-single-digit unfavorable currency impact on revenues in the fiscal fourth quarter.

The company expects modest gross margin expansion in fiscal fourth-quarter and fiscal 2023 aided by savings and impressive price execution, even amid escalated inflationary environment.

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 expects fiscal 2023 adjusted EPS growth of nearly 35% to 38-39 cents, up from the earlier range of 35-36 cents a share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Coty has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Coty has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Coty belongs to the Zacks Cosmetics industry. Another stock from the same industry, Helen of Troy (HELE - Free Report) , has gained 7% over the past month. More than a month has passed since the company reported results for the quarter ended February 2023.

Helen of Troy reported revenues of $484.58 million in the last reported quarter, representing a year-over-year change of -16.7%. EPS of $2.01 for the same period compares with $2.51 a year ago.

For the current quarter, Helen of Troy is expected to post earnings of $1.45 per share, indicating a change of -39.8% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Helen of Troy. Also, the stock has a VGM Score of A.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Helen of Troy Limited (HELE) - free report >>

Coty (COTY) - free report >>

Published in