Morgan Stanley Lowers Forward EPS On Coty

In a report published Thursday, Morgan Stanley analyst Dara Mohsenian reiterated an Equal-Weight rating on Coty COTY. In the report, Morgan Stanley noted, “Coty Q3 EPS of $0.22 was above our on-consensus $0.09 EPS estimate, but profit missed consensus by 2.5%, as taxes added 11 cents to EPS vs. our forecast and other below the profit line items added two cents. "In Q3, slightly better than expected topline (+2% organic vs. consensus at ~1.0-1.5%) and 50 bps of gross margin upside vs. consensus was offset by higher SG&A with higher advertising/promotion, higher compensation costs, and greater emerging markets investment. Q3 cash flow from operations was -$4M vs. +$70M (adj. for private stock comp.) last year. Net, given COTY Q4 guidance for flat organic sales growth, while increased investments in emerging markets should hinder margins, 4Q consensus estimates will likely come down significantly. We are raising of FY14 EPS estimate by 9% to $0.82 (from $0.75) given 3Q upside on taxes more than offsets our reduced 4Q est. "Our FY15 EPS estimate moves down 1% to $0.84 (from $0.85) with higher A&P spending given a competitive mass environment and investments in emerging markets.” Coty closed on Wednesday at $15.77.