It has been about a month since the last earnings report for Coty (COTY Quick QuoteCOTY - Free Report) . Shares have lost about 28.3% 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 its latest earnings report in order to get a better handle on the important drivers.

Coty Loss Widens in Q3, Consumer Beauty Revenues Decline 4%

Coty posted weaker-than-expected third-quarter fiscal 2026 results. The company reported an adjusted loss of three cents per share against the Zacks Consensus Estimate of breakeven earnings. Results also compared unfavorably with adjusted earnings of a penny in the year-ago quarter. 

Net revenues were $1,281.6 million, down 1% year over year, and slightly below the Zacks Consensus Estimate of $1,285 million. The metric included a 6% gain from foreign exchange. On a like-for-like (LFL) basis, revenues declined 7%, reflecting disruptions tied to the Middle East conflict.

Gross margin was 61.8%, down 230 basis points (bps) year over year, as supply-chain cost under-absorption from lower sales, higher excess and obsolescence in Consumer Beauty, and tariff-related freight costs weighed on results. Adjusted gross margin was 61.8%, down 250 bps. 

Adjusted operating income plunged 51% to $72.4 million on soft sales and gross profit, with the adjusted operating margin contracting 580 basis points to 5.6%. Adjusted EBITDA declined 38% to $127 million, with adjusted EBITDA margin down 580 basis points to 9.9%.

Coty’s Segment-Wise Performance

Prestige revenues were $830.9 million, essentially flat on a reported basis year over year, but declined 5% on a LFL basis, reflecting slower category growth. The quarter included an anticipated 2% headwind from Middle East-related conflict. The company’s Prestige strategy has been anchored by major brands like Burberry, Hugo Boss, Calvin Klein, Marc Jacobs, Chloe and Kylie Cosmetics. Year to date through the fiscal year, major launches continue to perform well, including BOSS Bottled Beyond and Cosmic by Kylie Jenner Intense. The adjusted operating margin in the segment decreased 420 basis points to 14.9%. 

Consumer Beauty revenues came in at $450.7 million, down 4% year over year on a reported basis and down 10% on a LFL basis, including a 1%-headwind from the conflict in the Middle East. The segment recorded an adjusted operating loss of $51.3 million, wider than a loss of $10.9 million in the year-ago quarter. However, the company is seeing encouraging signs in Consumer Beauty, with brands like CoverGirl and Sally Hansen gradually closing the gap with the broader category in terms of retail sales, while continuing to outperform the category when measured by unit sales.

COTY’s Regional Highlights

Americas: By geography, the Americas posted revenues of $510.4 million, down 4% year over year on a reported basis and down 6% on a LFL basis, primarily reflecting lower sales in the US and Canada. This was somewhat offset by increased sales in the Americas Travel Retail channel. 

EMEA: Revenues were $597.6 million, down 2% reported and 11% on a LFL basis, due to weaker performance in the Middle East, France, and Central and Eastern Europe. 

Asia Pacific: The segment was the standout, with revenues rising 9% to $173.6 million on a reported basis and 5% on a LFL basis, supported by higher sales in China, Korea, Japan and the Asia Travel Retail channel.

COTY’s Strategic & Financial Updates

The company’s curated strategic framework, which was unveiled last quarter, focuses on setting clearer priorities, directing investments more selectively, enhancing execution capabilities and strengthening support for its core businesses to drive focused growth. COTY is integrating this framework into its fiscal 2027 plans across both divisions, with a focus on streamlining and efficiency. This includes lowering the number of smaller launches, reducing marketing asset production costs, partly through broader use of AI across owned brands, while increasing spending on consumer engagement. It is working to simplify its operating model, aimed at driving stronger sell-out performance and expanding market share in time.

The company ended the quarter with financial net debt of $2.96 billion and a leverage ratio (net debt to adjusted EBITDA) of 3.4. Free cash flow was $275.6 million at the end of the nine months ending March 31, 2026. Cash and cash equivalents were $257.1 million at quarter end.

Coty’s Outlook

Consumer demand for beauty stays resilient, with strength in fragrances and cosmetics. While the Middle East conflict weighs on sales trends, consumer demand in developed markets has been broadly consistent with recent periods. Nevertheless, Coty’s curated strategic framework, focusing on core brands and markets, reducing portfolio complexity and realizing savings opportunities to aid investments in consumer engagement and protect profitability, appears encouraging.

For the fourth quarter of fiscal 2026, Coty expects LFL revenues to decrease by a mid-single-digit percentage, indicating a moderate sequential improvement from the third-quarter sales trends. This reflects a benefit from an easy year-over-year comparison base, mainly offset by headwinds in the Middle East business, which is likely to impact Q4 sales by an expected 2-3%. On a reported basis, management predicts foreign exchange to have a neutral effect in the impending quarter. 

Adjusted gross margins are likely to decline by roughly 100-200 bps year over year on operating deleverage from weaker shipments, tariff impacts, and elevated, though sequentially lower, excess and obsolescence, somewhat offset by productivity and procurement efforts. For Q4, Coty envisions adjusted EBITDA of $85-$95 million and adjusted EPS, excluding the equity swap, of breakeven to a loss of two cents per share.

For fiscal 2026, Coty anticipates adjusted EBITDA of approximately $838-$848 million, with adjusted EPS, excluding the equity swap, of 33-35 cents. Management forecasts free cash flow in the fourth quarter to be neutral to moderately positive, representing the seasonality of the business and working capital management.

For the Prestige division, the company continues to drive growth through a series of brand-building initiatives and product innovations across its fragrance portfolio. It is expanding the global reach of the Fall 2025 BOSS Bottled Beyond launch, with the BOSS Bottled franchise benefiting from share fiscal year-to-date across key markets, alongside U.S. distribution expansion and share gains for Hugo Boss in the US. A new Burberry Her campaign featuring Olivia Dean is reinforcing the strength of the franchise.

Looking ahead, the company is set to launch Calvin Klein Euphoria Elixirs in Spring 2026, a global female fragrance launch, with encouraging initial indicators in Europe and Travel Retail Americas. It is also elevating its Chloé Atelier des Fleurs line with the introduction of Les Essences Méditerranéennes, which is gaining strong traction in China. In addition, Marc Jacobs Beauty is set to debut in June 2026. Key launches are expected for fiscal 2027 across its core brands, including the introduction of a new Swarovski fragrance expected in the next year.

Consumer Beauty division is seeing progress with CoverGirl and Sally Hansen closing the gap with their respective categories in terms of retail sales. Both brands continue to outperform on a volume basis on robust performance from recent Spring product innovations. It continues to expand and strengthen its global presence for adidas, driven by the adidas Vibes scenting collection.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 51.84% due to these changes.

VGM Scores

At this time, Coty has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has a score of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Coty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.