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On Tuesday, DA Davidson adjusted its financial outlook for Coty Inc . (NYSE:COTY), reducing the price target from $12.50 to $12.00, while maintaining a Buy rating on the company’s shares. The adjustment followed Coty’s second fiscal quarter 2025 (F2Q25) earnings report, which revealed an EBITDA that surpassed expectations, yet organic sales decreased by 1%, falling short of the projected 1-2% growth. This marked the company’s first year-over-year decline since the COVID pandemic. According to InvestingPro data, Coty’s stock has declined over 25% in the past six months, currently trading near its 52-week low of $6.59, despite maintaining impressive gross profit margins of nearly 65%.
Coty’s prestige fragrance point-of-sale (POS) figures showed a high single-digit increase, but product shipments suffered due to retailers implementing stricter inventory management. The global POS growth rate for the mass beauty category also slowed, descending to low single digits from the mid-single digits seen in the first fiscal quarter of 2025 (F1Q25). While the company faces near-term challenges, InvestingPro analysis reveals multiple growth indicators and valuable insights, with over 30 additional exclusive ProTips available for subscribers.
Based on these results, Coty has revised its organic sales forecast for the second half of fiscal year 2025 (F2H25E), now expecting a decrease of 1-2% year-over-year, a significant drop from the previously anticipated increase of 3-4%. Consequently, DA Davidson has reduced its F2H EBITDA estimates by 18%, and its full-year fiscal 2025 (FY25) forecast by 6%.
The revised price target by DA Davidson reflects a valuation of 10 times the firm’s calendar year 2026 estimated EBITDA for Coty, which has been lowered from $1,324 million to $1,249 million. Despite the lowered sales and EBITDA projections, the analyst highlighted Coty’s potential asset sale, noting that the company’s $1.1 billion stake in Wella is expected to be sold within calendar year 2025.
In other recent news, Coty Inc. reported disappointing results for its fiscal second quarter, with both earnings and revenue falling short of analyst expectations. The beauty company’s adjusted earnings per share came in at $0.11, notably less than the projected $0.21. Revenue also underperformed, with a 3% year-over-year decline to $1.67 billion, missing the $1.73 billion anticipated by analysts.
This underperformance is reportedly due to a slowdown in the global beauty market, particularly within color cosmetics, and ongoing challenges in the Asia Pacific region. Despite these setbacks, Coty’s prestige fragrance portfolio saw growth, albeit hampered by retailers’ tight inventory management.
In terms of future developments, Coty anticipates its sales trends for the second half of fiscal 2025 to align with Q2’s -1% to -2% range, maintaining its full-year adjusted EPS guidance of $0.50-$0.52. Despite facing near-term challenges, Coty remains optimistic about its capacity to accelerate sales growth and outperform the beauty industry in the coming years, while also expanding margins and cash flow.
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