Citi sees Coty stock aligned with expectations but highlights liquidity risks

On Wednesday, Citi reaffirmed its Neutral rating on Coty Inc . (NYSE:COTY) stock, with a steady price target of $11.00.

The company's fourth-quarter results for fiscal year 2024 were in line with market expectations, and guidance for fiscal year 2025 met long-term algorithm predictions while exceeding consensus at the EBITDA level. Coty is anticipated to see revenue growth in the first half of fiscal year 2025, aligning with previous projections.

Coty's like-for-like (LFL) sales growth of 5% exceeded the forecast range of low-single to mid-single digits percentage growth, matching Citi's prediction and slightly under the consensus estimate of 5.2%.

Adjusted EBITDA reached $164.5 million, surpassing the company's guidance range of $153-163 million, Citi's estimate of $159 million, and aligning closely with the consensus of $164 million.

The adjusted earnings per share (EPS), excluding swaps, were reported at $0.07, which was higher than the guidance of $0.05 to $0.06, Citi's estimate of $0.05, and the consensus of $0.05.

Citi expects the market to respond positively to Coty's strong results and the better-than-anticipated EBITDA guidance for fiscal year 2025. The company has scheduled a conference call for tomorrow, August 21, 2024, at 8:15 AM ET to discuss these financial outcomes and future expectations in more detail.

In other recent news, Coty Inc. reported a mixed bag of results for its fourth quarter. The beauty company's Q4 adjusted earnings per share fell short of analyst estimates, coming in at -$0.03 instead of the projected $0.05.

Revenue for the same period was $1.36 billion, slightly under the consensus of $1.38 billion, but it did mark a 1% year-over-year increase on a reported basis and a 5% rise on a like-for-like (LFL) basis.

Coty's full fiscal year 2024 performance saw an 11% LFL revenue growth, outperforming its guidance range of 9-11%. The adjusted EBITDA also exceeded the company's outlook, growing by 12% to reach $1.09 billion. CEO Sue Nabi highlighted the company's 11% LFL growth, which surpassed the overall beauty market's growth of 9%.

Looking forward, Coty's fiscal 2025 earnings per share guidance is set at $0.54-$0.57, aligning closely with the $0.57 analyst consensus. The company anticipates results that align with its medium-term targets of 6-8% LFL revenue growth and 9-11% adjusted EBITDA growth.

The prestige fragrance revenues grew by a mid-teens percentage in FY24, outperforming the broader market's 10% growth, while the consumer beauty segment witnessed a 6% growth on both a reported and LFL basis for the year.

InvestingPro Insights

As Coty Inc. (NYSE:COTY) aligns with market and Citi's expectations, a look at the real-time data from InvestingPro reveals a nuanced picture of the company's financial health. Coty boasts a robust gross profit margin of 64.09% over the last twelve months as of Q3 2024, which is an impressive indicator of its ability to control costs relative to revenue. Despite some analysts revising earnings expectations downwards, Coty's revenue growth remains strong at 13.69% for the same period, suggesting a resilient demand for its products.

InvestingPro Tips highlight that while Coty is trading at a high earnings multiple with a P/E ratio of 40.15, the company is expected to be profitable this year, with a net income forecast to drop. This could be a sign of the company investing in its future growth or facing short-term headwinds. Additionally, the stock's volatility should be noted by potential investors, as Coty's short-term obligations currently exceed its liquid assets, indicating potential liquidity risks.

For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on Coty. With the next earnings date slated for August 20, 2024, and a fair value estimate by analysts at $13, compared to InvestingPro's fair value of $11.53, investors have valuable metrics to consider. Discover more in-depth InvestingPro Tips to navigate Coty's financial landscape by visiting https://www.investing.com/pro/COTY.

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