Coty (COTY) Up 12.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Coty (COTY). Shares have added about 12.1% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Coty due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Coty before we dive into how investors and analysts have reacted as of late.

Coty Reports Q4 Loss, LFL Revenues Decline Y/Y

Coty posted fourth-quarter fiscal 2025 results, wherein the top line beat the Zacks Consensus Estimate and the bottom line missed the same. Both metrics experienced year-over-year declines. As a result, shares of this company declined 17.7% in the after-hours trading session yesterday.

The company’s soft fourth-quarter performance was impacted by category headwinds, cautious retailer ordering and tariff-related pressures. However, Coty remains well-positioned as it enters fiscal 2026, underpinned by a robust pipeline of innovation, geographic and channel expansion, and disciplined cost savings. Despite near-term revenue declines, the company is executing a multi-pronged strategy centered on fragrance leadership, expanded distribution, organizational efficiency and ongoing deleveraging.

In the fiscal fourth quarter, Coty delivered an adjusted loss of 5 cents per share in contrast to the Zacks Consensus Estimate of adjusted earnings of 1 cent. Also, the bottom line declined from an adjusted loss of 3 cents reported in the year-ago quarter. Results included a 7-cent negative impact from the equity swap mark-to-market due to the stock price decline, compared with a 10-cent negative impact in the prior year.

Coty’s net revenues were $1,252.4 million, down 8% year over year. The metric reflected a 1% benefit from foreign currency exchange. Quarterly net revenues beat the Zacks Consensus Estimate of $1,203 million. On a like-for-like (“LFL”) basis, net revenues declined 9%, reflecting a decrease in Prestige and Consumer Beauty.

Taking a Closer Look at Coty’s Q4 Results

The adjusted and reported gross margin was 62.3%, down 190 basis points. This reflected a normalization from the unusually elevated gross margin levels seen last year.

Coty reported an adjusted operating income of $67.7 million, a 37% decline from the prior year’s level. The company's adjusted operating margin was 5.4%, reflecting a 250 basis-point decrease year over year.

Adjusted EBITDA of $126.7 million declined 23% year over year. The adjusted EBITDA margin was 10.1%, down 200 basis points year over year.

Q4 Insights of Coty’s Segments

Prestige: Net revenues in the segment were $760.6 million, accounting for 61% of total company sales. This represented a 5% decline on a reported basis, including a 2% benefit from foreign exchange. On a LFL basis, revenues declined 7%. The decline was mainly caused by underperformance in the U.S. market, proactive inventory rightsizing by retailers to align with current demand and lower prestige makeup and skincare sales.

The segment’s reported operating income was $38.1 million compared with $49.7 million in the year-ago quarter. Adjusted operating income was $74.7 million, down from $87.8 million in the prior-year quarter. The adjusted operating margin was 9.8%, down 110 basis points year over year. Prestige’s adjusted EBITDA was $102.9 million compared with $112.8 million in the year-ago quarter, with margins pressured by softer top-line performance.

Looking ahead, the Prestige segment is poised to benefit from a strong pipeline of blockbuster launches, including the global rollout of Boss Bottled Beyond and additional major product launches slated for both halves of fiscal 2026. The company is also extending key brands into new channels, such as Marc Jacobs on Amazon Premium Beauty, and preparing for new category entries in fragrance mists, ultra-premium fragrances and complementary scent formats like body mists and sprays, reinforcing its focus on diversification and premiumization.

Consumer Beauty: Net revenues amounted to $491.8 million, accounting for 39% of total sales. This represented a 12% decline on both reported and LFL basis, primarily caused by weakness in color cosmetics and body care categories.

The segment reported a loss, with an operating loss of $16 million compared with an operating income of $10.3 million in the prior-year quarter. Adjusted operating loss was $7 million compared with adjusted operating income of $20.2 million in the year-ago quarter. The adjusted loss margin was 1.4% compared with a 3.6% adjusted operating margin in the prior year. Adjusted EBITDA declined to $23.8 million from $51.7 million, with margins contracting 430 basis points to 4.8%.

For fiscal 2026 and beyond, the Consumer Beauty segment is focused on reigniting growth through innovation and expanded channel reach. Building on the momentum of adidas Vibes, the company is set to launch new innovations under key mass fragrance brands, introduce exclusive in-house collections such as Origen at Walmart and roll out fragrance mist extensions under brands like adidas and Nautica. In cosmetics, Coty is preparing to launch trend-led products in lip, mascara and nail care, supported by advanced technologies and consumer engagement. The expansion will be amplified through high-impact digital channels, including Amazon and TikTok Shop, positioning Consumer Beauty for long-term recovery and profitability.

Coty’s Regional Revenue Results

Coty’s Americas segment reported net revenues of $511.2 million, accounting for 40.8% of total sales. This reflected a 12% decline on a reported basis, including a 2% negative impact from foreign exchange and a 10% decline on a LFL basis. The decline was primarily caused by lower Prestige revenues in the United States, largely due to tough comparisons against elevated innovation levels in the prior year and proactive retailer inventory rightsizing. Additionally, Consumer Beauty sales in the United States were negatively impacted by softness in color cosmetics.

Coty’s EMEA segment generated net revenues of $574.2 million, accounting for 45.8% of total sales. This marked a 4% decline on a reported basis, including a 5% positive impact from foreign exchange. On a LFL basis, EMEA net revenues decreased 9% in the fiscal fourth quarter. Both reported and LFL sales were impacted by lower Prestige net revenues — primarily reflecting proactive inventory rightsizing to align with current demand trends — as well as softer Consumer Beauty net revenues.

Coty’s Asia Pacific segment reported net revenues of $167 million, representing 13.3% of total sales. This reflected an 8% decline on a reported basis, including a 1% negative impact from foreign exchange. The decline indicated softness across most markets. On a LFL basis, net revenues decreased 9%. Notably, Coty’s sell-out in nearly all Asia markets, excluding China, grew almost four times faster than the market, led by strong double-digit growth in fragrance and skincare.

Coty’s Financial Health Snapshot

The company ended the fiscal fourth quarter with cash and cash equivalents of $257.1 million, total debt of $4,008.4 million and financial net debt of $3,751.3 million, implying a leverage ratio of 3.5x. In the fiscal fourth quarter, cash provided by operating activities amounted to $83.2 million, while free cash flow was $34.9 million.

What to Expect From Coty in FY26

Entering fiscal 2026, Coty operates in a complex backdrop. Beauty demand remains solid, especially fragrances across price points and formats. Macro uncertainty, tariffs and a more promotional market are keeping retailer orders cautious. Coty is rolling out major innovations, a multi-brand push into fragrance mists and broader fragrance distribution, while rightsizing retailer inventories and rebalancing Consumer Beauty toward profit engines like mass fragrances.

Management expects sales trends to improve gradually through fiscal 2026 from the fiscal fourth quarter baseline reset. LFL sales are forecasted to decline 6-8% in the fiscal first quarter and 3-5% in the fiscal second quarter, with a return to LFL growth in the second half. Drivers include multiple launches in both Prestige and Consumer Beauty, geographic and channel expansion, and easier comparisons. Organizational changes are expected to start yielding results, with benefits building over the coming quarters.

On reported revenues, Coty estimates a low single-digit FX benefit in the first half. Gross margin pressure is expected in the first half from lower sales and net tariff impact, with tariff-mitigation efforts contributing more meaningfully in the second half. Step-ups in fixed-cost savings under the All-In To Win program should broadly balance the resumption of variable compensation. Some quarterly phasing fluctuations in net fixed costs are anticipated through the year.

Profit trends are expected to improve sequentially from fiscal fourth-quarter levels. Adjusted EBITDA is predicted to decline a mid-to-high-teens percentage in the fiscal first quarter and a low-to-mid-teens percentage in the fiscal second quarter, followed by a return to adjusted EBITDA growth in the second half. The cadence reflects the timing of launches, tariff mitigation, cost actions and progressively easier comparisons.

Earnings should follow a similar shape. Lower interest expense and a reduced tax rate support a high single-digit to mid-teen decline in first-half adjusted EPS to 33-36 cents. Adjusted EPS growth is expected in the second half. Free cash flow in the first half is expected to exceed $350 million, positioning leverage approximately in line with or below 3.5x, despite lower EBITDA and FX headwinds from Euro-denominated debt.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -14.14% due to these changes.

VGM Scores

Currently, Coty has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Coty has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Coty belongs to the Zacks Cosmetics industry. Another stock from the same industry, Nu Skin Enterprises (NUS), has gained 8.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2025.

Nu Skin reported revenues of $386.14 million in the last reported quarter, representing a year-over-year change of -12.1%. EPS of $0.43 for the same period compares with $0.21 a year ago.

Nu Skin is expected to post earnings of $0.30 per share for the current quarter, representing a year-over-year change of +76.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Nu Skin. Also, the stock has a VGM Score of A.

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This article originally published on Zacks Investment Research (zacks.com).

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