It has been about a month since the last earnings report for Coty (COTY Quick QuoteCOTY - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.

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

COTY Q2 Earnings & Revenues Top Estimates on Solid Beauty Market

Coty posted strong second-quarter fiscal 2024 results, as the top and bottom lines increased year over year and cruised past the Zacks Consensus Estimate. Revenues grew across all categories and regions.

Quarter in Detail

Coty delivered adjusted EPS of 25 cents, beating the Zacks Consensus Estimate of 20 cents a share. The bottom line increased from 22 cents reported in the year-ago quarter.

Coty’s net revenues came in at $1,727.6 million, up 13% year over year. The metric surpassed the Zacks Consensus Estimate of $1,671 million. Revenues included a 3% favorable impact of currency movements. Like-for-like (LFL) revenues jumped 11% on growth in the Prestige and Consumer Beauty business segments. We had expected LFL revenues to increase by 7.4%. I

The adjusted gross margin came in at 65.1%, contracting 40 basis points (bps) year over year. The gross margin decline resulted from increased excess & obsolescence, inflation and tough comparison with some benefits realized in the year-ago period. This was partly compensated by supply-chain productivity savings and pricing. Adjusted operating income came in at $309.3 million, up 18% from $261.4 million in the prior-year quarter. The adjusted operating margin stood at 17.9%, up 70 bps. The adjusted EBITDA in the quarter amounted to $366.4 million, up 15%, due to increased sales and gross profit. The adjusted EBITDA margin stood at 21.2%, up 40 bps.

Segment Results

Prestige: Net revenues in the segment rose 17% to $1,122.6 million. The segment’s revenues were up 15% on an LFL basis, driven by continued strength in prestige beauty demand, which fueled double-digit growth across all regions. The company witnessed robust growth in Travel Retail.

Consumer Beauty: Net revenues rose 7% year over year to $605 million. The segment’s LFL sales jumped 5%, with robust growth in color cosmetics, mass fragrance and mass skincare. The company saw solid LFL growth across the EMEA, the Americas, Europe, Brazil, the Middle East and Latin America.

Region-Wise Results

Net revenues in the Americas increased 10% to $687.9 million. LFL revenues were up 11%, driven by growth in the Prestige and Consumer Beauty segments. Our model suggested revenue growth of 6% for the second quarter. Sales in the EMEA grew 16% year over year to $825.7 million, while the figure increased 10% on an LFL basis. The unit’s performance gained from impressive growth across the Prestige and Consumer Beauty segments. Sales in the Asia-Pacific region rose 15% (up 16% at LFL) year over year to $214 million. Growth was backed by strong Prestige revenues. We had expected revenues to increase 16% in the Asia Pacific region.

Other Updates

The company ended the quarter with cash and cash equivalents of $450 million and net long-term debt of $3,682.9 million. For the six months ended Dec 31, 2023, cash provided by operating activities amounted to $608.1 million.

On Nov 13, 2023, management raised its share buyback plan by another $600 million, taking its total authorization to nearly $1 billion. On Feb 6, 2024, Coty unveiled that it entered a long-term license with Marni, which is a popular Italian luxury fashion brand.  This marks another step in the company’s focus on its six-pillar strategy. Apart from this, COTY is targeting the divestiture of its stake in Wella by the end of CY25.

Outlook

Management continues to expect LFL revenue growth of 9-11%. For the second half of fiscal 2024, Coty anticipates LFL revenue growth of 6-8%. Revenues in the second half of fiscal 2024 are likely to include a 1-2% adverse impact of currency rates, along with a roughly 2% scope downside from the sale of the Lacoste license. For fiscal 2024, Coty expects adjusted EBITDA margin expansion of 10-30 bps. The company projects fiscal 2024 adjusted EBITDA in the range of $1,080-$1,090 million. Management anticipates modest gross margin growth in fiscal 2024, including robust gross margin expansion in the second half. Management still envisions fiscal 2024 adjusted EPS, excluding equity swap, in the band of 44-47 cents, indicating growth of 16-25% year over year.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Coty has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Coty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Coty is part of the Zacks Cosmetics industry. Over the past month, Estee Lauder (EL Quick QuoteEL - Free Report) , a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended December 2023 more than a month ago.

Estee Lauder reported revenues of $4.28 billion in the last reported quarter, representing a year-over-year change of -7.4%. EPS of $0.88 for the same period compares with $1.54 a year ago.

For the current quarter, Estee Lauder is expected to post earnings of $0.51 per share, indicating a change of +8.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Estee Lauder. Also, the stock has a VGM Score of D.