Factors to Watch as Coty (COTY) Gears Up for Q4 Earnings

Coty Inc. COTY is likely to register a decline in the top and bottom lines when it reports fourth-quarter fiscal 2020 numbers on Aug 27, before market open. The Zacks Consensus Estimate for loss has widened by a cent over the past 30 days to a loss of 10 cents per share. This suggests a deterioration from earnings of 16 cents reported in the prior-year period. Notably, Coty delivered a negative earnings surprise in the last reported quarter. Further, this cosmetics behemoth has a considerably high trailing four-quarter negative earnings surprise, on average.

The Zacks Consensus Estimate for revenues is pegged at almost $1,267 million, indicating a slump of 40.1% from the prior-year quarter’s reported figure.

Coty Inc. Price and EPS Surprise

Coty Inc. Price and EPS Surprise

Coty Inc. price-eps-surprise | Coty Inc. Quote

Key Factors to Note

Coty has been grappling with coronavirus-led concerns like salon closures and retail store closures. Moreover, restricted air travel has been a blow to the travel retail network. Although most stores and salons have reopened, their closures for part of the quarter are likely to have affected Coty’s performance. Also, soft traffic at reopened outlets is a concerning factor.

Apart from this, Coty’s Consumer Beauty segment has been posting soft organic sales for a while. The company is also seeing headwinds in the color cosmetic category, given the shifting preference toward more important personal care categories.

Nevertheless, Coty’s e-commerce business has been a breather amid the pandemic. Such trends along with a continued focus on innovation and brand enhancements have been drivers. Toward this end, Coty’s acquisition of a 51% stake in King Kylie this January is noteworthy. Also, the company’s buyout of the iconic Burberry brand (in the second quarter of fiscal 2018) has been yielding results. These upsides, together with Coty’s focus on optimizing the overall cost structure, bode well.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Coty this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Coty currently has a Zacks Rank #3 and an Earnings ESP of +2.78%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Big Lots BIG has an Earnings ESP of +10.57% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG has an Earnings ESP of +9.64% and a Zacks Rank #2.

Best Buy BBY has an Earnings ESP of +6.63% and a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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