Coty Posts Outstanding Q1 Results; Shares Leap 15.3%


Shares of multinational beauty company Coty, Inc. (COTY) gained up to 15.3% after it reported outstanding results for the fiscal first quarter ended September 30. Shares of the company, however, declined 3.7% in the extended trading session to end the day at $10.29.

The New York-based company develops, produces and sells beauty products like fragrances, cosmetics, skincare, nail care and hair care products in nearly 130 nations and territories. Its brands include Burberry, Bottega Veneta, Calvin Klein, Gucci, Davidoff, Hugo Boss, Lacoste, Marc Jacobs and Tiffany & Co., among others.

Earnings and Revenue

Adjusted earnings stood at $0.08 per share, beating the Street’s estimate of $0.03 per share. The company had reported a loss of $0.01 per share in the first quarter of the last fiscal year.

Net revenues increased 22% year-over-year to $1.37 billion, just above analysts’ expectations of $1.36 billion. Prestige and Consumer Beauty segments, along with e-commerce channels, led the growth.

Segment Revenues

Driven by continued strength in the U.S., China, the EMEA region and Travel Retail, the Prestige segment’s net revenues grew 35.1% year-over-year to $870.7 million.

Net revenues generated by the Consumer Beauty segment rose 4.4% to $501 million during the quarter. The strong performance of Sally Hansen and the increasing presence of CoverGirl led to the growth in revenues.

CEO Comments

The CEO of Coty, Sue Y. Nabi, said, “Our objective coming into the Fiscal Year 2022 was to build on the great results we delivered last year and further execute on our strategic growth pillars. I am very pleased to say that we are off to a great start, building upon our success. Q1 marks the fifth consecutive quarter of Coty delivering results in line to ahead of expectations.”

FY22 Guidance

Coty has raised the guidance for the Fiscal Year 2022 on the back of improvement in Western Europe, rebound in Travel Retail and continued strength in the U.S. and China. It expects sales growth in low-to-mid teens percentage as compared to the earlier guidance of low teens growth.

Furthermore, the company anticipates adjusted EBITDA of at least $900 million and adjusted EPS in the range of $0.19 to $0.23. (See Insiders’ Hot Stocks on TipRanks)

Wall Street’s Take

Following the release of the first-quarter results, Stifel Nicolaus analyst Mark Astrachan maintained a Hold rating on the stock and raised the price target to $13 from $11 (21.6% upside potential).

The analyst said, “We increase FY2022-FY2023 adjusted EBITDA estimates by 4%-5% following solid Q1 results. We also lift our price target to $13, 14x FY2023E EBITDA seeing more upside than downside from current levels.”

Analyst Recommendation

Overall, the stock has a Hold consensus rating based on 3 Buys, 4 Holds and 1 Sell. The average Coty price target of $10.85 implies 1.5% upside potential. Shares have gained 140.2% over the past year.

Risk Analysis

According to the TipRanks’ Risk Factors tool, Coty is at risk mainly from one factor: Finance & Corporate, which accounts for 30% of the total 37 risks identified for the stock. Under the Finance & Corporate risk category, the company has 11 risks, details of which can be found on the TipRanks website.

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