On Wednesday, Citi maintained its Neutral stance on Coty Inc . (NYSE:COTY) stock with a consistent price target of $11.00.
Ahead of the company's fourth-quarter earnings report, expected on August 20, 2024, Citi expressed a positive outlook despite a 19% decline in the stock over the last three months.
The firm anticipates Coty's prestige volume to continue growing at a low single to mid-single digit percent on a two-year compound annual growth rate (CAGR) during the fourth quarter of fiscal year 2024 and the first half of fiscal year 2025.
Coty is projected to experience a sequential deceleration in top-line growth as it cycles through a period of retail restocking benefits. However, Citi predicts like-for-like (LFL) sales will pick up in the first half of fiscal year 2025. This expected growth is attributed to new product launches, sustained momentum from recent innovations, and an uptick in prestige makeup sales.
The analyst firm suggests that Coty's fiscal year 2025 like-for-like sales expectations are conservative, with the Street projecting a 6.4% increase. A strong performance in the fourth quarter of 2024, along with the introduction of fiscal year 2025 LFL guidance that aligns with or exceeds the company's medium-term algorithm of 6-8%, could potentially lead to a favorable market response.
Citi's analysis indicates that Coty may face less exposure to industry challenges in Travel Retail and Mainland China due to the company's relatively new operations in these areas. This positioning could mitigate some risks associated with broader market headwinds.
InvestingPro Insights
As Coty Inc. (NYSE:COTY) approaches its fourth-quarter earnings report, insights from InvestingPro show a company with a strong gross profit margin of 64.09% over the last twelve months as of Q3 2024, which may reflect the positive outlook Citi has on Coty's prestige volume growth. Despite the recent stock price volatility, with a -26.33% year-to-date price total return, Coty's revenue growth remains robust at 13.69% for the same period, suggesting that the company's top-line is expanding at a healthy rate.
InvestingPro Tips indicate that Coty is trading at a high earnings multiple, with a P/E ratio of 38.59, which is high relative to near-term earnings growth. Analysts have revised their earnings expectations downwards for the upcoming period, which may be a point of consideration for investors looking at the stock's future performance. For those seeking more detailed analysis, InvestingPro offers additional tips on Coty, providing a comprehensive view of potential investment considerations.
With the next earnings date set for August 20, 2024, investors will be keen to see if Coty's performance aligns with Citi's projections and whether the company can maintain its momentum in prestige makeup sales and new product launches. The current market capitalization of Coty stands at $7.9 billion, and for investors seeking more in-depth analysis, there are over 10 additional InvestingPro Tips available, which can help to navigate the complexities of the stock's current valuation and future prospects.
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