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Coty (COTY) Down 9.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Coty (COTY - Free Report) . Shares have lost about 9.8% 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 its most recent earnings report in order to get a better handle on the important drivers.

COTY Pulls Up Fiscal 2024 Outlook Despite Q3 Earnings Miss

Coty posted mixed third-quarter fiscal 2024 results, with the bottom line missing the Zacks Consensus Estimate and declining year over year. The top line surpassed the consensus mark and grew year over year. The company saw robust growth in Prestige and Consumer Beauty segments across every region and core categories, including fragrances, color cosmetics, skin care and body care. The uptick was bolstered by a diverse portfolio of its top-performing brands. Management raised the high end of its guidance range for the fiscal 2024.

Quarter in Detail

Coty delivered adjusted earnings per share (EPS) of 5 cents, missing the Zacks Consensus Estimate of 6 cents a share. The bottom line slumped from 19 cents reported in the year-ago quarter.

Coty’s net revenues came in at $1,385.6 million, up 7.5% year over year. The metric surpassed the Zacks Consensus Estimate of $1,373.8 million. Like-for-like (LFL) revenues rose 10% on growth in the Prestige and Consumer Beauty business segments. Results benefited from growth in fragrances, color cosmetics, skin care and body care. We had expected LFL revenues to increase by 6.5%.

The gross margin came in at 64.8%, expanding 190 bps, mainly driven by premiumization, carryover pricing, supply chain productivity savings and easing inflation. The adjusted gross margin of 64.8%, also expanded 190 bps from 62.9% reported in the year-ago quarter. Coty’s quarterly operating income of $77.8 million surged 79% on the back of increased sales and gross profit. The operating margin stood at 5.6%, expanding 220 bps, driven by impressive gross margin expansion. Increased A&CP and fixed costs somewhat offset this. The adjusted EBITDA in the quarter amounted to $199.9 million, up 10%, due to increased sales and gross profit. The adjusted EBITDA margin stood at 14.4%, up 30 bps.

Segment Results

Prestige: Net revenues in the segment jumped 8% to $867.2 million. The segment’s revenues were up 13% on an LFL basis, driven by continued strength in prestige beauty demand. This fueled strong growth in all regions, especially in APAC, EMEA and the Travel Retail channel.

Consumer Beauty: Net revenues rose 6% year over year to $518.4 million. The segment’s LFL sales also jumped 6%. The upside can be attributed to growth in mass fragrances, mass skin & body care and color cosmetics across the majority of countries.

Region-Wise Results

Net revenues in the Americas increased 8% to $589 million, driven by growth in the Prestige and Consumer Beauty segments. LFL revenues were up 11%. Our model suggested revenue growth of 4% for the fiscal third quarter.

Sales in the EMEA rose 7% year over year to $628 million, while the figure increased 9% on an LFL basis. The unit’s performance gained from impressive growth across the Prestige and Consumer Beauty segments. Our model suggested revenue growth of 4% for the fiscal third quarter.

Sales in the Asia-Pacific region rose 7% (up 11% at LFL) year over year to $168.6 million. Growth was backed by strong Prestige revenues. We had expected revenues to increase 10% in the Asia Pacific region.

Other Updates & Outlook

The company ended the quarter with cash and cash equivalents of $260.2 million and net long-term debt of $3,902.3 million. For the nine months ended Mar 31, 2024, cash provided by operating activities amounted to $438.1 million. On Feb 22, 2024, management repurchased 27 million shares for nearly $200 million.

For the fiscal 2024, management now anticipates LFL revenue growth to reach the higher end of its previous guidance range of 9-11% growth. This includes expectations for low-to-mid single-digit percentage LFL revenue growth in the fiscal fourth quarter. The quarterly guidance reflects a mid-single-digit percentage headwind in the Prestige business due to tough year-over-year comparisons. The company’s fiscal fourth-quarter revenues are likely to witness a 1-2% headwind from unfavorable currency rates and almost a 2% scope headwind from the divestiture of the Lacoste license.

Coty expects fiscal 2024 adjusted EBITDA margin expansion to be toward the higher end of its previous guidance range of 10-30 bps. The company still projects fiscal 2024 adjusted EBITDA in the range of $1,080-$1,090 million. Overall, the company expects a modest gross margin expansion in the year.

Coty anticipates adjusted EPS, excluding equity swap, to now reach the upper end of the prior guidance range of 44-47 cents, indicating growth at the upper end of the 16-25% range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -7.49% due to these changes.

VGM Scores

At this time, Coty has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, 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, Helen of Troy (HELE - Free Report) , a stock from the same industry, has gained 7.4%. The company reported its results for the quarter ended February 2024 more than a month ago.

Helen of Troy reported revenues of $489.2 million in the last reported quarter, representing a year-over-year change of +1%. EPS of $2.45 for the same period compares with $2.01 a year ago.

For the current quarter, Helen of Troy is expected to post earnings of $1.59 per share, indicating a change of -18% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.2% over the last 30 days.

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

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