On Thursday, Canaccord Genuity maintained its Buy rating and $14.00 price target for Coty Inc . (NYSE:COTY), following the company's fourth-quarter earnings report. Coty's revenue for the quarter ending in June showed a modest increase of 0.9%, falling short of the anticipated 1.8% growth.
This included the impact of foreign exchange rates and divestitures. Despite this, like-for-like (LFL) sales were on the upper end of the company's forecast, growing by 5%, which aligns with the previously given range of low to mid-single digits.
The beauty company also reported improved profit margins, with adjusted EBITDA reaching $164.5 million. This figure slightly surpassed the top end of their guidance at $163.4 million, with adjusted EBITDA margins at 12.1%, marginally higher than the market's expectation of 12.0%. However, adjusted earnings per share (EPS) came in at a loss of $0.03, missing estimates due to an approximate $88 million headwind from a mark-to-market valuation of their equity swap, which introduced a $0.10 EPS challenge.
Coty's management expressed optimism regarding the company's trajectory, forecasting a 6-8% growth in LFL sales for the first half of fiscal year 2025, ending in December, with an anticipated acceleration in the latter half of the year due to more favorable comparisons. They also expect their Prestige segment to continue outperforming their consumer brand portfolio.
Looking at the broader beauty market, the management team anticipates steady growth in mature markets like the United States and Western Europe, projecting a mid-single-digit increase, with prestige fragrance sales expected to exceed that rate.
In emerging markets, including China, travel retail, Latin America, and the Middle East and North Africa, double-digit growth is forecasted. Coty's market share gains in key regions, a strong lineup of new products in the first half of fiscal year 2025, and enhanced profit margins underpin Canaccord Genuity's reiterated Buy rating and price target as the company enters the new fiscal year.
In other recent news, Coty Inc. reported its fourth-quarter results for fiscal year 2024, with double-digit growth in organic sales and operating profit for the third consecutive year. The beauty company also provided guidance for an acceleration in organic sales growth in fiscal year 2025, with projected EBITDA expected to increase by 9% to 11%. DA Davidson acknowledged Coty's performance and raised their own EBITDA growth expectations for the company in fiscal year 2025 to 10%.
In response to these developments, Stifel maintained a Hold rating on Coty Inc. stock but lowered the shares target, while Citi reaffirmed its Neutral rating on Coty Inc. stock, highlighting the company's alignment with market expectations. Coty's fourth-quarter performance was solid and indicative of modest market share gains across various categories.
For the upcoming fiscal year 2025, Coty anticipates results that align with its medium-term targets of 6-8% like-for-like revenue growth and 9-11% adjusted EBITDA growth. The company's prestige fragrance revenues grew by a mid-teens percentage in FY24, outpacing the broader market's 10% growth.
InvestingPro Insights
As Coty Inc. (NYSE:COTY) navigates through its fiscal challenges and opportunities, InvestingPro data and insights offer a deeper dive into the company's financial health and stock performance. With a market capitalization of $8.79 billion, Coty is trading at a high earnings multiple, with an adjusted P/E ratio of 106.8 as of the last twelve months ending Q4 2024. This indicates investor confidence in future earnings but also suggests a premium price tag on those expected earnings. The company's gross profit margin remains impressive at 64.39%, reflecting its ability to maintain profitability despite market fluctuations.
InvestingPro Tips highlight that Coty's net income is expected to grow this year, and analysts predict the company will be profitable. However, it's worth noting that short-term obligations exceed liquid assets, which could be a point of consideration for investors focused on liquidity and financial stability. Additionally, three analysts have revised their earnings downwards for the upcoming period, signaling potential caution in the near term. For those interested in exploring further, there are additional tips available on InvestingPro, offering more nuanced insights into Coty's financial outlook.
Investors tracking Coty's stock performance will note a significant return over the last week, with a 7.54% price total return, which may align with the management's optimistic view of the company's trajectory. For a more comprehensive analysis, including analyst targets and fair value assessments, visit the InvestingPro platform for Coty, which provides an InvestingPro Fair Value estimate of $11.18 as of the recent data.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.