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Why Is Coty (COTY) Down 10.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Coty (COTY - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
But investors have to be wondering, 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 catalysts.
Coty's Q4 Loss Wider Than Expected, Prestige Segment Revenues Up 1%
Coty posted a fourth-quarter fiscal 2026 adjusted loss of two cents per share, improving 60% from the year-ago loss of five cents. The result was wider than the Zacks Consensus Estimate of a one-cent loss.
Net revenues rose 1% year over year to $1,269.2 million and beat the consensus estimate of $1,193 million. Reported sales included a 3% foreign-exchange benefit, while like-for-like (LFL) revenues dipped 1%.
Reported and adjusted gross margin was 60.9%, down 140 basis points year over year. Lower cost absorption from soft volumes, elevated excess and obsolescence charges in both divisions and tariffs weighed on profitability.
Adjusted operating income fell 42% year over year to $39.5 million, while adjusted operating margin contracted 230 basis points year over year to 3.1%. Adjusted EBITDA declined 26% to $93.6 million, with the margin shrinking 270 basis points to 7.4%.
Prestige revenues increased 1% on a reported basis to $771.8 million and represented 61% of total sales. Foreign exchange added 2%, while LFL revenues slipped 0.5%, consisting of an estimated 1.5% Middle East conflict headwind. Higher Prestige cosmetics and fragrance sales were partly offset by lower skincare sales. Adjusted operating income decreased 19% year over year to $60.2 million. Reported operating performance faced pressure from lower fragrance shipments, tariff costs, weaker cost absorption and higher fixed costs.
Consumer Beauty revenues advanced 1% year over year to $497.4 million and accounted for 39% of total sales. The segment benefited 4% from foreign exchange, but LFL revenues fell 3%, including an estimated 1% Middle East headwind. Mass body and skincare sales increased, partly offset by lower mass color cosmetics sales. The adjusted operating loss widened to $20.7 million from a loss of $7 million, while adjusted EBITDA fell 67% to $7.8 million.
Coty's Regional Trends Stay Mixed
Americas revenues climbed 9% year over year to $554.7 million and increased 6% on an LFL basis. Growth was driven by the United States, Brazil and regional Travel Retail, partly offset by soft sales in Canada.
EMEA revenues dropped 8% year over year to $528.9 million and declined 10% on an LFL basis, reflecting weakness in the Middle East, Germany and Central and Eastern Europe.
Asia Pacific revenues rose 11% to $185.6 million and increased 7% on a LFL basis, supported by China, Southeast Asia, Australia and New Zealand and the regional Travel Retail channel.
COTY's Cash Flow and Debt Position Strengthen
Cash flow from operating activities increased to $116 million from $83.2 million a year earlier. Free cash flow more than doubled to $72.6 million from $34.9 million. For fiscal 2026, operating cash flow rose to $537.8 million from $492.6 million a year ago, and free cash flow increased to $348.2 million from $277.6 million. Total debt declined to $3.1 billion as of June 30, 2026, from $3.2 billion at March 31, 2026. Financial net debt decreased to $2.91 billion from $2.96 billion over the same period, while the financial leverage ratio stood at 3.4 times.
Coty's Portfolio Moves Sharpen the Focus
Coty agreed with Kering on an early transition of the Gucci Beauty license. The company received $250 million at signing and is set to receive another $150 million no later than Sept. 30, 2027, with up to $30 million contingent on certain criteria.
The company will continue operating the Gucci Beauty brand through at least June 30, 2027. Its mitigation plans include accelerating core brands, maximizing newer portfolio additions and pursuing a significant fixed-cost reduction program. Coty continues to advance its Coty.Curated framework, focusing on sharper portfolio management and stronger execution to drive growth and enhance brand performance.
Coty is gaining momentum across Prestige and Consumer Beauty, driven by successful new launches, strong consumer response to Marc Jacobs Beauty and improving U.S. sell-out trends for CoverGirl and Sally Hansen.
COTY's Fiscal 2027 Outlook Points to Transition
For the first quarter of fiscal 2027, Coty expects LFL revenues to decrease by a low- to mid-single-digit percentage, with foreign exchange having a neutral reported-revenue impact. Adjusted gross margin is projected to fall 50-100 basis points year over year, while adjusted EBITDA is expected to decline by a low-teens percentage.
Management expects first-quarter adjusted earnings, excluding the equity swap, of 11-13 cents per share. First-half fiscal 2027 free cash flow is projected to exceed $300 million.
Fiscal 2027 is expected to mark a transition toward stronger execution, as Coty advances its strategic review and implements Coty.Curated, with first-quarter EBITDA trends showing sequential improvement from year-over-year trends in the second half of fiscal 2026.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -9.76% due to these changes.
VGM Scores
At this time, Coty has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of A on the value side, putting it in the top quintile 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Coty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
View the Zacks #1 Rank List
Image: Bigstock
Why Is Coty (COTY) Down 10.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Coty (COTY - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
But investors have to be wondering, 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 catalysts.
Coty's Q4 Loss Wider Than Expected, Prestige Segment Revenues Up 1%
Coty posted a fourth-quarter fiscal 2026 adjusted loss of two cents per share, improving 60% from the year-ago loss of five cents. The result was wider than the Zacks Consensus Estimate of a one-cent loss.
Net revenues rose 1% year over year to $1,269.2 million and beat the consensus estimate of $1,193 million. Reported sales included a 3% foreign-exchange benefit, while like-for-like (LFL) revenues dipped 1%.
Reported and adjusted gross margin was 60.9%, down 140 basis points year over year. Lower cost absorption from soft volumes, elevated excess and obsolescence charges in both divisions and tariffs weighed on profitability.
Adjusted operating income fell 42% year over year to $39.5 million, while adjusted operating margin contracted 230 basis points year over year to 3.1%. Adjusted EBITDA declined 26% to $93.6 million, with the margin shrinking 270 basis points to 7.4%.
Prestige revenues increased 1% on a reported basis to $771.8 million and represented 61% of total sales. Foreign exchange added 2%, while LFL revenues slipped 0.5%, consisting of an estimated 1.5% Middle East conflict headwind. Higher Prestige cosmetics and fragrance sales were partly offset by lower skincare sales. Adjusted operating income decreased 19% year over year to $60.2 million. Reported operating performance faced pressure from lower fragrance shipments, tariff costs, weaker cost absorption and higher fixed costs.
Consumer Beauty revenues advanced 1% year over year to $497.4 million and accounted for 39% of total sales. The segment benefited 4% from foreign exchange, but LFL revenues fell 3%, including an estimated 1% Middle East headwind. Mass body and skincare sales increased, partly offset by lower mass color cosmetics sales. The adjusted operating loss widened to $20.7 million from a loss of $7 million, while adjusted EBITDA fell 67% to $7.8 million.
Coty's Regional Trends Stay Mixed
Americas revenues climbed 9% year over year to $554.7 million and increased 6% on an LFL basis. Growth was driven by the United States, Brazil and regional Travel Retail, partly offset by soft sales in Canada.
EMEA revenues dropped 8% year over year to $528.9 million and declined 10% on an LFL basis, reflecting weakness in the Middle East, Germany and Central and Eastern Europe.
Asia Pacific revenues rose 11% to $185.6 million and increased 7% on a LFL basis, supported by China, Southeast Asia, Australia and New Zealand and the regional Travel Retail channel.
COTY's Cash Flow and Debt Position Strengthen
Cash flow from operating activities increased to $116 million from $83.2 million a year earlier. Free cash flow more than doubled to $72.6 million from $34.9 million. For fiscal 2026, operating cash flow rose to $537.8 million from $492.6 million a year ago, and free cash flow increased to $348.2 million from $277.6 million. Total debt declined to $3.1 billion as of June 30, 2026, from $3.2 billion at March 31, 2026. Financial net debt decreased to $2.91 billion from $2.96 billion over the same period, while the financial leverage ratio stood at 3.4 times.
Coty's Portfolio Moves Sharpen the Focus
Coty agreed with Kering on an early transition of the Gucci Beauty license. The company received $250 million at signing and is set to receive another $150 million no later than Sept. 30, 2027, with up to $30 million contingent on certain criteria.
The company will continue operating the Gucci Beauty brand through at least June 30, 2027. Its mitigation plans include accelerating core brands, maximizing newer portfolio additions and pursuing a significant fixed-cost reduction program. Coty continues to advance its Coty.Curated framework, focusing on sharper portfolio management and stronger execution to drive growth and enhance brand performance.
Coty is gaining momentum across Prestige and Consumer Beauty, driven by successful new launches, strong consumer response to Marc Jacobs Beauty and improving U.S. sell-out trends for CoverGirl and Sally Hansen.
COTY's Fiscal 2027 Outlook Points to Transition
For the first quarter of fiscal 2027, Coty expects LFL revenues to decrease by a low- to mid-single-digit percentage, with foreign exchange having a neutral reported-revenue impact. Adjusted gross margin is projected to fall 50-100 basis points year over year, while adjusted EBITDA is expected to decline by a low-teens percentage.
Management expects first-quarter adjusted earnings, excluding the equity swap, of 11-13 cents per share. First-half fiscal 2027 free cash flow is projected to exceed $300 million.
Fiscal 2027 is expected to mark a transition toward stronger execution, as Coty advances its strategic review and implements Coty.Curated, with first-quarter EBITDA trends showing sequential improvement from year-over-year trends in the second half of fiscal 2026.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -9.76% due to these changes.
VGM Scores
At this time, Coty has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of A on the value side, putting it in the top quintile 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Coty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.