Will Investment in Key Brands Help Coty’s Fiscal 3Q16 Revenue?

Can Coty Beat Analysts' Estimates Yet Again in Fiscal 3Q16?

Coty’s fiscal 2Q16 revenue recap

Coty (COTY) is set to release its fiscal 3Q16 earnings before the market opens on May 3, 2016. The company’s fiscal 3Q16 ended on March 31, 2016.

Coty’s earnings and revenue were ahead of Wall Street analysts’ consensus expectations in fiscal 2Q16, which ended on December 31, 2016.

Coty’s net revenue fell 3.9% to $1.2 billion in fiscal 2Q16 compared to $1.3 billion in fiscal 2Q15. Its total adjusted revenue fell 1% like-for-like. However, on a constant currency basis, its net revenue rose 3% in fiscal 2Q16.

Despite a fall in the US market and falls in most currencies, Coty’s fragrance segment trends and color cosmetics segment saw improvement compared to fiscal 1Q16.

Wall Street analysts’ expectations

For fiscal 3Q16 ended March 31, 2016, Wall Street analysts’ consensus revenue estimate is ~$1 billion, a rise of 4.4% from Coty’s revenue in the same quarter last year.

Procter & Gamble’s (PG) revenue fell 8.5% to $16.9 billion in fiscal 2Q16. PG’s revenue was negatively impacted by an 8% fall in foreign exchange, Venezuelan deconsolidation, and a 3% fall in brand divestitures.

However, Estée Lauder’s (EL) fiscal 2Q16 net revenue rose 2.6% to $3.1 billion compared to $3.0 billion in fiscal 2Q15. Avon’s (AVP) 4Q15 revenue fell 31.3% to $1.6 billion compared to $2.3 billion in 4Q14 due to Brazil’s IPI (Imposto Sobre Produtos Industrializados) tax, the VAT (value added tax) credit, and the adverse effects of foreign exchange headwinds.

Other companies such as L’Oréal (LRLCY) and Beiersdorf (BDRFF) have presences outside the United States, which makes them vulnerable to foreign exchange headwinds.

Investment in key brands

Coty expects its fiscal 2Q16 revenue trend to continue for the remainder of the fiscal year as it continues to rationalize its non-strategic product lines and businesses. The company plans to focus on investments made in key brands such as Calvin Klein, Rimmel, and Marc Jacobs.

Coty makes up 1.4% of the PowerShares DWA Consumer Staples Momentum ETF (PSL).

In the next part of the series, we’ll discuss Coty’s 2Q16 earnings as well as what investors expect in 3Q16.

Continue to Next Part

Browse this series on Market Realist:

• Part 2 - What Investors Expect from Coty’s Fiscal 3Q16 Earnings

• Part 3 - Will Acquisitions Aid Coty’s Operating Margin in Fiscal 3Q16?

• Part 4 - Will Coty’s Stock Price Rise after Its Fiscal 3Q16 Results?