Coty Inc. (NYSE:COTY) Faces Changing Analyst Expectations Amid Competitive Beauty Industry

Coty Inc. (NYSE:COTY) is a global beauty company known for its wide range of cosmetics, skincare, and fragrance products. Despite its strong market presence, Coty faces stiff competition from industry giants like L'Oreal and Estée Lauder. The company recently reported its financial results for the second quarter of fiscal year 2025, revealing some challenges.

On February 10, 2025, Coty reported earnings per share (EPS) of $0.11, which was significantly below the Zacks Consensus Estimate of $0.22. This represents a 50% negative earnings surprise, highlighting the company's struggle to meet market expectations. Compared to the same quarter last year, when EPS was $0.25, this marks a notable decline. Over the past four quarters, Coty has consistently failed to exceed consensus EPS estimates.

Coty's revenue for the quarter was approximately $1.67 billion, falling short of the estimated $1.72 billion. This 2.65% miss from the Zacks Consensus Estimate also reflects a decrease from the $1.73 billion reported in the same period the previous year. The company has only surpassed consensus revenue estimates once in the last four quarters, indicating ongoing challenges in revenue generation.

The company has revised its annual profit forecast downward, now expecting an adjusted per-share profit between 50 and 52 cents, down from the previous forecast of 54 to 57 cents. This revision comes amid a decline in demand for cosmetics in the U.S. and stricter inventory management by retailers. Similar trends have been observed by competitors like Elf Beauty and L'Oreal, as highlighted by recent reports.

Despite these challenges, Coty achieved significant gross and operating margin expansion in the first half of fiscal year 2025. However, net revenue decreased by 1% year-over-year, influenced by foreign exchange rates and the divestiture of the Lacoste license. The company's like-for-like net revenue grew by 2%, driven by performance in prestige and mass fragrances, as well as mass skincare, although cosmetics and body care saw declines.

• Coty Inc. (NYSE:COTY) faces potential challenges in its Q2 earnings report due to downturns in the Chinese mainland and Asia Travel Retail markets.
• Analysts project a 20% decrease in earnings per share (EPS) and a slight 0.7% decrease in revenue compared to the same period last year.
• Financial metrics such as a price-to-earnings (P/E) ratio of 34.83 and a debt-to-equity ratio of 1.01 will be key in assessing Coty's market valuation and financial health.

Coty Inc. (NYSE:COTY) is a global beauty company known for its wide range of cosmetics, skincare, and fragrance products. The company operates in a competitive market alongside major players like L'Oréal and Estée Lauder. Coty is set to release its quarterly earnings on February 10, 2025, with analysts estimating earnings per share (EPS) of $0.20 and revenue of $1.72 billion.

However, Coty's upcoming Q2 earnings report may reflect challenges due to a downturn in the Chinese mainland and Asia Travel Retail markets. These regions have shown weakness, which could negatively impact Coty's financial performance. Analysts expect a decline in earnings, with projections of $0.20 per share, a 20% decrease from the same period last year.

Revenue is anticipated to reach $1.72 billion, a slight 0.7% decrease from the previous year's quarter. Over the past 30 days, there has been a 0.6% downward revision in the consensus EPS estimate. Such revisions can influence investor reactions, as empirical studies show a strong correlation between earnings estimate trends and short-term stock price performance.

Coty's financial metrics provide insight into its market valuation. The company has a price-to-earnings (P/E) ratio of 34.83, indicating how the market values its earnings. The price-to-sales ratio is 0.97, showing investor willingness to pay per dollar of sales. The enterprise value to sales ratio is 1.61, reflecting total valuation relative to sales.

Coty's debt-to-equity ratio is 1.01, indicating the proportion of debt used to finance assets relative to equity. The current ratio is 0.85, suggesting its ability to cover short-term liabilities with short-term assets. These metrics, along with the earnings report, will be crucial in assessing Coty's financial health and future prospects.

Coty (NYSE:COTY) posted mixed first-quarter results and reduced its full-year earnings outlook.

For the quarter, Coty reported adjusted earnings per share of $0.15, missing the analyst consensus of $0.20. Revenue rose 2% year-over-year to $1.67 billion, narrowly missing the expected $1.68 billion.

Coty’s Prestige segment showed resilience, with revenue up 5% on a reported basis and 7% like-for-like. However, the Consumer Beauty segment faced challenges, with a 3% decline on a reported basis and flat performance on a like-for-like basis.

For fiscal 2025, Coty lowered its earnings per share guidance to $0.54-$0.57, down from its prior range of $0.56-$0.60, and anticipates adjusted EBITDA growth near the lower end of its previous 9-11% target. Despite these adjustments, Coty maintained its free cash flow growth forecast in the low to mid $400 million range and reaffirmed its goal to reduce leverage below 3x by the end of 2024.

TD Cowen analysts raised their rating on Coty (NYSE:COTY) from Market Perform to Outperform, increasing the price target from $13.00 to $16.00.

The analysts' optimism stems from a recent fireside chat with Coty's Chief Brands Officer of Consumer Beauty, Stefano Curti, and insights from Coty's presentation at CAGNY. The upgrade is based on several key factors: the strong momentum in the fragrance sector, with Coty's expertise in prestige fragrances (around 55% of sales) attracting new generations in varied ways; opportunities for diversification and premiumization across different geographies and product categories; the need for modernizing its Consumer Beauty segment, which represents 38% of fiscal 2023 sales and is recognized widely but requires updates in product offerings and marketing strategies; and Coty's ability to generate significant cash flow, reducing debt leverage.

Additionally, the analysts pointed out Coty's potential for margin expansion compared to peers, with current gross margins in the low 60% range versus competitors like L’Oréal and Estée Lauder in the low 70%. This potential is attributed to increased penetration in prestige products and Asia, along with ongoing cost-saving measures.

TD Cowen analysts raised their rating on Coty (NYSE:COTY) from Market Perform to Outperform, increasing the price target from $13.00 to $16.00.

The analysts' optimism stems from a recent fireside chat with Coty's Chief Brands Officer of Consumer Beauty, Stefano Curti, and insights from Coty's presentation at CAGNY. The upgrade is based on several key factors: the strong momentum in the fragrance sector, with Coty's expertise in prestige fragrances (around 55% of sales) attracting new generations in varied ways; opportunities for diversification and premiumization across different geographies and product categories; the need for modernizing its Consumer Beauty segment, which represents 38% of fiscal 2023 sales and is recognized widely but requires updates in product offerings and marketing strategies; and Coty's ability to generate significant cash flow, reducing debt leverage.

Additionally, the analysts pointed out Coty's potential for margin expansion compared to peers, with current gross margins in the low 60% range versus competitors like L’Oréal and Estée Lauder in the low 70%. This potential is attributed to increased penetration in prestige products and Asia, along with ongoing cost-saving measures.

Coty (NYSE:COTY) reported its Q3 earnings results on Tuesday, with EPS of $0.19, coming in better than the Street estimate of $0.03. Revenue was $1.29 billion, beating the Street estimate of $1.23 billion.

This led to an increase in guidance, but it reflects a more modest Q4, largely due to inventory re-stocking actions in Q3 that led to a one-time mid-single-digit benefit to growth. Demand remains healthy around the globe with incremental upside from China as the country reopens and the company invests in new skincare launches in the region.

For the full 2023 year, the company expects EPS to be in the range of $0.38-$0.39, compared to the Street estimate of $0.37.