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Why Coty’s Stock Price Isn’t Showing Much Momentum

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Jun. 14 2016, Published 3:56 p.m. ET

Coty’s stock price analysis

On June 13, 2016, Coty’s (COTY) stock price was trading at $26.36. The stock price has risen 5.7% year-to-date (or YTD) and 29.0% since January 2015.

On May 2, 2016, the company was trading at its YTD peak of $31.02. However, after Coty’s disappointing fiscal 3Q16 results, its stock fell 8.7% to $28.35 on May 3, 2016.

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Stock movement versus peers

Five weeks after its results, Coty’s stock has fallen 7%. Coty’s stock has consistently seen upward movement since the beginning of 2015. However, the stock fell 21.8% to $21.79 on January 15, 2016, from $27.86 on December 16, 2015. The fall was primarily due to a fall in global markets. The stock was able to sustain some of its gains until February 2016.

In comparison, the benchmark S&P 500 Index (SPY) (IVV) (VOO) has risen by 3.3% YTD and 1.0% since January 2015. Other companies Procter & Gamble’s (PG) and Avon’s (AVP) stock prices have fallen 8.7% and 56.8%, respectively, since January 2015. Estée Lauder’s (EL) stock has risen by 20.8% since January 2015.

Share repurchase and debt

In fiscal 3Q16, Coty didn’t repurchase any shares, but the company aims to be opportunistic with its existing 500 million share repurchase authorization. Its net debt rose by $1.4 billion to $3.8 billion, driven by borrowings in connection with the acquisition of the Brazilian Beauty Business.

Term loan financing secured

Last quarter, Coty closed on a $4.5 billion credit facility to refinance its existing debt, with new borrowings subject to longer maturities. Despite volatile financial markets, the company increased the size of its financings by $500 million, reflecting strong market demand.

In addition in fiscal 3Q16, Coty also secured incremental 465 million euro term loan financing under its existing credit facilities.

In the coming parts of the series, we’ll focus on key takeaways from Coty’s fiscal 3Q16 results. Coty makes up 0.1% of the iShares Russell Mid-Cap Growth ETF (IWP).[1. Updated on June 13, 2016]

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