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Coty Stock Tanks 22.5% on Dismal Q1 2019 Revenue

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Dismal numbers

On November 7, Coty (COTY) stock fell 22.5% after it released its dismal earnings results for the first quarter of fiscal 2019, which ended on September 30. Its revenue in the quarter was ~$2.03 billion, which missed analysts’ consensus estimate of $2.17 billion. On a YoY (year-over-year) basis, its revenue fell 9.2%. On a like-for-like basis, its revenue fell 7.7%. Its adjusted EPS were $0.11, better than the consensus estimate of $0.08.

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Weakness in the company’s Consumer Beauty segment and widespread supply chain disruptions led to its weak first-quarter numbers. Supply chain disruptions alone caused a 5% fall in its revenue on a like-for-like basis. Even Coty’s strong Luxury segment reported a revenue fall of 2.1% on a like-for-like basis. Component supply shortages and warehouse disruptions marred the segment’s top line performance.

Coty’s management has stated that it’s working on resolving its supply chain troubles, and these are likely to dissipate largely by the third quarter of 2019. However, the negative impact of its first-quarter performance is likely to spill over beyond fiscal 2019.

Coty stock has fallen 56.5% to $8.66 YTD (year-to-date) as of November 7. In comparison, Estée Lauder (EL) has risen 11.9%, and Inter Parfums (IPAR) has jumped 41.7%. Revlon (REV) has risen 0.6% YTD.

Analyst action following the first-quarter announcement

There have been two target price revisions on Coty stock following its first-quarter earnings announcement, and more will likely come in the coming days. On November 7, Morgan Stanley cut its price target to $10.00 from $14.50 and lowered its rating to an “equal-weight.” Jefferies lowered its target price to $10.00 from $12.00.

Currently, analysts’ target price for COTY is $12.33, which reflects a 42.4% upside to the price of the stock on November 7.

In the wake of Coty’s first-quarter results, 25% of the 16 analysts covering the stock have given it “buys” as of November 7. Another 63% of analysts have given it “holds.” The remaining analysts have given it “sell” ratings.

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