Market Overview

6 Reasons Why Coty Is No Longer A Buy At BMO

6 Reasons Why Coty Is No Longer A Buy At BMO

Beauty company Coty Inc (NYSE: COTY) reported fiscal fourth-quarter earnings Monday that prompted BMO Capital Markets to downgrade the stock on fears the company will miss its fiscal 2019 guidance.  

The Analyst

BMO's Shannon Coyne downgraded Coty from Outperform to Market Perform with a price target lowered from $18 to $12.

The Thesis

Coty guided its fiscal 2019 EPS to a range of 74-78 cents in its earnings report, but six factors suggest the company may fall short of its estimates, Coyne said in the downgrade note. (See the analyst's track record here.) 

They are: 

  • Supply chain disruptions seen in Q4 may take longer to fix and make it difficult to determine the health of the company versus transitory execution problems.
  • The overall mass beauty market in the U.S. is declining by a low single-digit rate, but new independent brands are gaining share.
  • Coty still needs to clear out old inventory and is doing so through increased promotions, and a full reset with new packaging isn't expected until December.
  • Management said it will re-invest $90 million from a $150-million cost saving initiative, but this figure is likely to come in higher.
  • Traction is being seen with beauty influencers but is unlikely to reap any notable benefits until the second half of the fiscal year.
  • Debt levels remain high, with a current net debt/adjusted EBITDA multiple of 5.27 times. The figure should improve to 4 times by 2020, but still gives management minimal options for accretive M&A deals.

Price Action

Coty shares were trading up 2 percent to $11.75 at the time of publication Wednesday. 

Related Links:

Coty Q4 Earnings Preview

Deutsche Bank: 4 Reasons Why Coty's Stock Is No Longer Attractive

Latest Ratings for COTY

Nov 2019MaintainsMarket Perform
Nov 2019MaintainsHold
Oct 2019MaintainsEqual-Weight

View More Analyst Ratings for COTY
View the Latest Analyst Ratings

Posted-In: Beauty Beauty Products BMO Capital Markets Shannon CoyneAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (COTY)

View Comments and Join the Discussion!

Latest Ratings

NXTCBank of AmericaReiterates89.0
RNRJP MorganAssumes173.0
PBHTD SecuritiesMaintains100.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

Argenx Shares Up After AbbVie Exercises Option To License Immuno-Oncology Drug

Janney: Nightstar Therapeutics Has 'Significant Upside Potential' With Retinal Disorder Treatments