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Why Is Coty (COTY) Down 16.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Coty (COTY - Free Report) . Shares have lost about 16.2% 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 catalysts.
Coty Beats on Q2 Earnings, Raises Bottom-line View
Coty posted second-quarter fiscal 2022 adjusted earnings of 17 cents per share, which surpassed the Zacks Consensus Estimate of 12 cents. The bottom line improved from 13 cents reported in the year-ago quarter. Coty’s net revenues came in at $1,578.2 million, up 12% year over year. The metric lagged the Zacks Consensus Estimate of $1,611.1 million. LFL revenues increased 12%, backed by growth in the Prestige and the Consumer Beauty business segments.
Adjusted gross margin came in at 64.6%, increasing from 58.7% in the prior-year quarter. The upside was supported by favorable intra-category mix-shift, price and mix management, improvement in excess & obsolescence and better absorption. Adjusted operating income came in at $236.3 million, rising from $203 million in the prior-year quarter. The adjusted EBITDA for the quarter amounted to $311.9 million, up 10% from $284.5 million in the prior-year quarter. The increase was mainly driven by a higher gross margin and continued fixed-cost reductions. These were somewhat offset by increased A&CP expenses. Adjusted operating margin for the second quarter increased 70 bps to 15%, while the adjusted EBITDA margin came in at 19.8%.
Channel Results
Prestige: Net revenues in the segment advanced 12% to $1,008 million. The segment’s revenues were up 12% on an LFL basis, driven by strength in every region, including continued recovery in most EMEA markets, Travel Retail, China and the United States.
Consumer Beauty: Net revenues rose 11% year over year to $570.2 million, while LFL sales jumped 12%. The segment benefited from double-digit LFL growth across all regions in the quarter. Solid performance across the color cosmetics category was also an upside.
Segment Results
Net revenues in the Americas increased 9% to $587 million. LFL revenues were also up 9%, driven by solid growth of Prestige and Consumer Beauty segments. Sales in EMEA increased 12% year over year to $795 million, while the figure rose 13% on an LFL basis. The unit’s performance gained from broad-based growth across the Prestige and Consumer Beauty segment. Sales in the Asia-Pacific region rose 17% (up 16% at LFL) year on year to $196.2 million. The upside was driven by solid performance across China along with continued recovery in Travel Retail.
Outlook
The company saw solid sales and sell-out momentum in the first half of fiscal 2022, with LFL sales growth of more than 13%. Thanks to such upsides, Coty expects fiscal 2022 LFL sales to be at the upper end of its guidance range of low-to-mid teens percentage growth. The company expects unfavorable currency rates to impact reported sales by 3-4% in the back half of the year.
For fiscal 2022, adjusted EBITDA is expected to come in at $900 million at a minimum on a constant-currency basis, indicating solid year-over-year growth in EBITDA margin. Owing to solid fiscal second-quarter earnings performance, management pushed the fiscal 2022 earnings view upward. Fiscal 2022 adjusted EPS is expected in the range of 22-26 cents, up from earlier guidance of 20-24 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -66.67% due to these changes.
VGM Scores
At this time, Coty has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade 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. Notably, Coty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Coty (COTY) Down 16.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Coty (COTY - Free Report) . Shares have lost about 16.2% 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 catalysts.
Coty Beats on Q2 Earnings, Raises Bottom-line View
Coty posted second-quarter fiscal 2022 adjusted earnings of 17 cents per share, which surpassed the Zacks Consensus Estimate of 12 cents. The bottom line improved from 13 cents reported in the year-ago quarter. Coty’s net revenues came in at $1,578.2 million, up 12% year over year. The metric lagged the Zacks Consensus Estimate of $1,611.1 million. LFL revenues increased 12%, backed by growth in the Prestige and the Consumer Beauty business segments.
Adjusted gross margin came in at 64.6%, increasing from 58.7% in the prior-year quarter. The upside was supported by favorable intra-category mix-shift, price and mix management, improvement in excess & obsolescence and better absorption. Adjusted operating income came in at $236.3 million, rising from $203 million in the prior-year quarter. The adjusted EBITDA for the quarter amounted to $311.9 million, up 10% from $284.5 million in the prior-year quarter. The increase was mainly driven by a higher gross margin and continued fixed-cost reductions. These were somewhat offset by increased A&CP expenses. Adjusted operating margin for the second quarter increased 70 bps to 15%, while the adjusted EBITDA margin came in at 19.8%.
Channel Results
Prestige: Net revenues in the segment advanced 12% to $1,008 million. The segment’s revenues were up 12% on an LFL basis, driven by strength in every region, including continued recovery in most EMEA markets, Travel Retail, China and the United States.
Consumer Beauty: Net revenues rose 11% year over year to $570.2 million, while LFL sales jumped 12%. The segment benefited from double-digit LFL growth across all regions in the quarter. Solid performance across the color cosmetics category was also an upside.
Segment Results
Net revenues in the Americas increased 9% to $587 million. LFL revenues were also up 9%, driven by solid growth of Prestige and Consumer Beauty segments. Sales in EMEA increased 12% year over year to $795 million, while the figure rose 13% on an LFL basis. The unit’s performance gained from broad-based growth across the Prestige and Consumer Beauty segment. Sales in the Asia-Pacific region rose 17% (up 16% at LFL) year on year to $196.2 million. The upside was driven by solid performance across China along with continued recovery in Travel Retail.
Outlook
The company saw solid sales and sell-out momentum in the first half of fiscal 2022, with LFL sales growth of more than 13%. Thanks to such upsides, Coty expects fiscal 2022 LFL sales to be at the upper end of its guidance range of low-to-mid teens percentage growth. The company expects unfavorable currency rates to impact reported sales by 3-4% in the back half of the year.
For fiscal 2022, adjusted EBITDA is expected to come in at $900 million at a minimum on a constant-currency basis, indicating solid year-over-year growth in EBITDA margin. Owing to solid fiscal second-quarter earnings performance, management pushed the fiscal 2022 earnings view upward. Fiscal 2022 adjusted EPS is expected in the range of 22-26 cents, up from earlier guidance of 20-24 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -66.67% due to these changes.
VGM Scores
At this time, Coty has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade 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. Notably, Coty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.