Coty Inc. (COTY) Bundle
Understanding Coty Inc. (COTY) Revenue Streams
Understanding Coty Inc.’s Revenue Streams
The financial performance of Coty Inc. for the three months ended September 30, 2024, showcases a nuanced picture of revenue generation across its various business segments.
Breakdown of Primary Revenue Sources
During the three months ended September 30, 2024, Coty Inc. reported net revenues of $1,671.5 million, an increase from $1,641.4 million in the same period of 2023, reflecting a year-over-year growth of 2%.
| Segment | Net Revenues (in millions) | Change (%) |
|---|---|---|
| Prestige | $1,114.1 | 5% |
| Consumer Beauty | $557.4 | (3%) |
| Total | $1,671.5 | 2% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate illustrates a modest increase, with the Prestige segment leading this trend. The Prestige segment saw an increase of $49.4 million, while the Consumer Beauty segment experienced a decline of $19.3 million.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to the overall revenue is telling of the business's dynamics:
- Prestige segment contributes 66.6% of total revenues.
- Consumer Beauty segment contributes 33.4% of total revenues.
Analysis of Significant Changes in Revenue Streams
The decline in Consumer Beauty revenues by 3% is attributed to:
- A decrease in color cosmetics sales by $29.7 million.
- A decrease in mass bodycare sales by $15.8 million.
Conversely, the Prestige segment benefited from:
- Prestige fragrance sales growth of $83.2 million.
- Positive pricing impacts due to prior price increases.
Overall, the revenue growth in the Prestige segment against the decline in the Consumer Beauty sector underscores a shift in consumer preferences towards higher-margin products.
A Deep Dive into Coty Inc. (COTY) Profitability
Profitability Metrics
Analyzing the profitability metrics of Coty Inc. (COTY) provides crucial insights into its financial health as of 2024. Below are the key profitability metrics including gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, Coty reported:
- Gross Profit: $445.7 million
- Operating Income: $237.8 million
- Net Income: $82.9 million
The margins for these profits were as follows:
- Gross Margin: 26.7%
- Operating Margin: 14.2%
- Net Profit Margin: 4.8%
Trends in Profitability Over Time
Comparing the profitability metrics year-over-year shows significant improvement:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit | $445.7 million | $426.8 million | 4.2% |
| Operating Income | $237.8 million | $197.5 million | 20.4% |
| Net Income | $82.9 million | $1.6 million | >100% |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, Coty Inc.'s profitability ratios indicate a competitive position:
- Industry Average Gross Margin: 25.0%
- Industry Average Operating Margin: 12.0%
- Industry Average Net Profit Margin: 5.0%
Coty's gross margin of 26.7% surpasses the industry average, while its net profit margin of 4.8% is slightly below the industry average. The operating margin of 14.2% shows strong operational efficiency compared to its peers.
Analysis of Operational Efficiency
Examining the operational efficiency through cost management reveals:
- Cost of Goods Sold (COGS): Decreased to 34.5% of net revenues in Q3 2024 from 36.5% in Q3 2023.
- Adjusted Operating Income: $303.6 million in Q3 2024, compared to $302.2 million in Q3 2023.
- Adjusted EBITDA: $360.1 million, slightly down from $360.3 million in the previous year.
This reflects a gross margin increase of approximately 200 basis points, driven by improved manufacturing efficiencies and cost management strategies.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| COGS as % of Revenue | 34.5% | 36.5% | -5.5% |
| Adjusted Operating Income | $303.6 million | $302.2 million | 0.5% |
| Adjusted EBITDA | $360.1 million | $360.3 million | -0.1% |
Debt vs. Equity: How Coty Inc. (COTY) Finances Its Growth
Debt vs. Equity: How Coty Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company's total debt stood at $4,002.2 million, comprising:
- Senior Secured Notes due in 2026: $650.0 million
- 2026 Euro Senior Secured Notes: $781.2 million
- 2027 Euro Senior Secured Notes: $558.0 million
- 2028 Euro Senior Secured Notes: $558.0 million
- 2029 Dollar Senior Secured Notes: $500.0 million
- 2030 Dollar Senior Secured Notes: $750.0 million
- Senior Unsecured Notes due in 2026: $201.2 million
- Finance lease obligations & other long-term debt: $3.8 million
Short-term debt was reported as $0.0 million for both September 30, 2024, and June 30, 2024.
Debt-to-Equity Ratio
The total equity as of September 30, 2024, was reported at $4,231.9 million. This results in a debt-to-equity ratio of:
Debt-to-Equity Ratio = Total Debt / Total Equity = $4,002.2 million / $4,231.9 million = 0.945
This ratio is close to the industry average of approximately 1.0, indicating a balanced approach to leveraging debt and equity.
Recent Debt Issuances and Credit Ratings
In July 2023, the company issued $750.0 million of 6.625% senior secured notes due 2030, receiving net proceeds of $740.6 million. In September 2023, it issued €500.0 million of 5.750% senior secured notes due 2028, netting €493.8 million.
As of September 2024, the company's senior secured notes received investment-grade ratings, enhancing its credit profile.
Balancing Debt Financing and Equity Funding
The company continues to focus on reducing its debt levels while maintaining sufficient liquidity. As of September 30, 2024, it had $283.6 million in cash and cash equivalents. The company has also engaged in share repurchase agreements to manage equity.
In 2024, the company executed forward repurchase contracts totaling $200.0 million to hedge against share repurchases, showing a strategic approach to managing both debt and equity financing.
| Debt Type | Amount (in million) |
|---|---|
| Senior Secured Notes (2026) | $650.0 |
| 2026 Euro Senior Secured Notes | $781.2 |
| 2027 Euro Senior Secured Notes | $558.0 |
| 2028 Euro Senior Secured Notes | $558.0 |
| 2029 Dollar Senior Secured Notes | $500.0 |
| 2030 Dollar Senior Secured Notes | $750.0 |
| Senior Unsecured Notes (2026) | $201.2 |
| Finance Lease Obligations | $3.8 |
| Total Debt | $4,002.2 |
Assessing Coty Inc. (COTY) Liquidity
Assessing Coty Inc.'s Liquidity
Current Ratio: As of September 30, 2024, Coty Inc. reported a current ratio of 0.85, calculated from current assets of $2,233.7 million and current liabilities of $2,637.6 million.
Quick Ratio: The quick ratio stands at 0.63 as of the same date, derived from liquid assets (cash and cash equivalents plus trade receivables) totaling $987.1 million against current liabilities of $2,637.6 million.
Analysis of Working Capital Trends
Working capital is calculated as current assets minus current liabilities. As of September 30, 2024, Coty Inc. has a working capital deficiency of $403.9 million, indicating challenges in meeting short-term obligations. The working capital position has declined from $361.7 million as of June 30, 2024, reflecting increased current liabilities primarily due to a rise in accounts payable and accrued expenses.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | 2,233.7 | 2,637.6 | (403.9) |
| June 30, 2024 | 1,963.5 | 2,601.8 | (638.3) |
Cash Flow Statements Overview
For the three months ended September 30, 2024:
- Operating Cash Flow: Net cash provided by operating activities was $67.4 million, down from $186.2 million in the same period of 2023.
- Investing Cash Flow: Net cash used in investing activities increased to $77.3 million from $62.2 million year over year.
- Financing Cash Flow: Net cash used in financing activities was $10.4 million, a significant decrease from $78.6 million in the prior year.
| Cash Flow Type | Q1 2024 (in millions) | Q1 2023 (in millions) |
|---|---|---|
| Operating Activities | 67.4 | 186.2 |
| Investing Activities | (77.3) | (62.2) |
| Financing Activities | (10.4) | (78.6) |
Potential Liquidity Concerns or Strengths
Liquidity concerns are evident due to a low current ratio of 0.85 and a quick ratio of 0.63, indicating potential difficulties in covering short-term liabilities. The reduced cash flow from operations, down $118.8 million, reflects increased working capital needs and may pose further strain on liquidity. Despite these challenges, the company has plans for debt reduction and improving cash management through factoring trade receivables, which could help stabilize liquidity in the near term.
Is Coty Inc. (COTY) Overvalued or Undervalued?
Valuation Analysis
To assess whether Coty Inc. is overvalued or undervalued, we will examine key financial metrics such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical measure for determining the relative value of a company's shares. As of September 30, 2024, Coty Inc. had a diluted earnings per share (EPS) of $0.15. Given the stock price of approximately $9.00 per share, this results in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $9.00 / $0.15 = 60.00
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. As of September 30, 2024, the total equity attributable to Coty Inc. was $4,045.2 million with 869.9 million shares outstanding. The book value per share is calculated as:
Book Value per Share = Total Equity / Shares Outstanding = $4,045.2 million / 869.9 million = $4.65
With a stock price of $9.00, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $9.00 / $4.65 = 1.93
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is useful for evaluating a company’s overall financial health. Coty Inc.'s enterprise value is calculated as:
- Market Capitalization: $9.00 869.9 million = $7,829.1 million
- Total Debt: $4,002.2 million
- Cash and Cash Equivalents: $283.6 million
- Enterprise Value = Market Capitalization + Total Debt - Cash = $7,829.1 million + $4,002.2 million - $283.6 million = $11,547.7 million
Adjusted EBITDA for the three months ended September 30, 2024, was $360.1 million. Thus, the EV/EBITDA ratio is:
EV/EBITDA Ratio = Enterprise Value / Adjusted EBITDA = $11,547.7 million / $360.1 million = 32.1
Stock Price Trends
Over the last 12 months, Coty Inc.'s stock price has shown a trend of volatility. The stock started the year at approximately $7.50 and reached a high of $10.00 before settling around $9.00.
Dividend Yield and Payout Ratios
Coty Inc. has not declared any cash dividends in the recent fiscal years. The company has a Convertible Series B Preferred Stock dividend of $3.3 million, but there is no common stock dividend payout ratio to report as no dividends have been paid to common shareholders.
Analyst Consensus on Stock Valuation
Analyst consensus on Coty Inc. is currently mixed, with a majority rating the stock as a Hold based on its financial metrics and market performance.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 60.00 |
| P/B Ratio | 1.93 |
| EV/EBITDA Ratio | 32.1 |
| Stock Price (Current) | $9.00 |
| 12-Month Stock Price Range | $7.50 - $10.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Coty Inc. (COTY)
Key Risks Facing Coty Inc.
Overview of Internal and External Risks:
Coty Inc. faces various internal and external risks that impact its financial health. These include:
- Industry Competition: The beauty and personal care market is highly competitive, with numerous established brands and new entrants vying for market share.
- Regulatory Changes: The company is subject to regulations that can affect product formulations and marketing practices across different regions.
- Market Conditions: Fluctuations in consumer demand, economic downturns, and changes in consumer preferences can adversely affect sales.
Operational Risks:
Recent earnings reports highlighted several operational risks:
- Supply Chain Disruptions: Global supply chain issues have led to increased costs and delays in product availability.
- Foreign Currency Exposure: The company is exposed to fluctuations in foreign exchange rates which can impact profitability. In the three months ended September 30, 2024, losses from foreign currency exposure amounted to approximately $29.9 million.
Financial Risks:
The financial landscape poses several challenges:
- Debt Levels: As of September 30, 2024, total liabilities stood at $8.04 billion, with long-term debt of $3.93 billion.
- Interest Expense: Interest expense for the three months ended September 30, 2024, was $61.8 million, a decrease from $69.8 million in the same period of 2023.
Strategic Risks:
The company’s strategic decisions also carry risks:
- Market Positioning: Changes in brand strategy or product lines can impact market share. The Prestige segment reported operating income of $241.5 million for the three months ended September 30, 2024, which was an increase from $221.6 million in 2023.
- Acquisition Risks: Integration of acquisitions can be challenging and may not yield the expected benefits.
Mitigation Strategies:
Coty Inc. has implemented various strategies to mitigate these risks:
- Cost Management: The company has focused on reducing costs, with selling, general, and administrative expenses increasing by 5% to $808 million in the three months ended September 30, 2024, compared to $767.4 million in the prior year.
- Debt Management: The company is actively managing its debt, aiming to improve the maturity mix and reduce overall debt levels.
| Key Financial Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $82.9 million | $1.6 million | >100% |
| Adjusted Net Income | $128.1 million | $74.1 million | 73% |
| Operating Income (Total) | $237.8 million | $197.5 million | 20% |
| Long-term Debt | $3.93 billion | $3.84 billion | 2.4% |
| Interest Expense | $61.8 million | $69.8 million | -11.5% |
Future Growth Prospects for Coty Inc. (COTY)
Future Growth Prospects for Coty Inc.
Product Innovations: Coty Inc. continues to invest in product innovations across its portfolio, with a focus on prestige fragrances and skincare. For the three months ended September 30, 2024, net revenues from the Prestige segment increased by 5%, reaching $1,114.1 million compared to $1,064.7 million in the prior year. This growth was driven by successful launches of new fragrances such as Gucci Flora Gorgeous Orchid and Burberry Goddess Intense, contributing to a $83.2 million increase in prestige fragrance sales.
Market Expansions: The company is actively expanding its market presence, particularly in emerging markets. For instance, mass fragrance sales grew by $23.1 million, attributed to brand innovation and geographical expansion, indicating a strategic push into growth-engine markets. The total net revenues for the Consumer Beauty segment were $557.4 million, reflecting a decline of 3%, primarily due to challenges in the U.S. color cosmetics market.
Acquisitions: Coty Inc. has been focusing on strategic acquisitions to enhance its market position. The adjusted net income attributable to Coty for the three months ended September 30, 2024, reached $128.1 million, a 73% increase from $74.1 million in the previous year. This indicates that acquisitions have positively impacted financial performance and market share.
Revenue Growth Projections: Analysts project continued revenue growth for Coty, with future projections estimating revenues to exceed $7 billion by the end of fiscal 2025. This growth is expected to be supported by new product launches and market expansion initiatives.
Earnings Estimates: For the fiscal year 2024, earnings per share (EPS) estimates are projected at $0.60, reflecting an increase from the previous year's $0.36. This is indicative of the company's improving profitability and operational efficiency.
Strategic Initiatives: Coty has embarked on several strategic initiatives aimed at driving growth, including enhancing its digital and e-commerce capabilities. The company reported that digital sales contributed significantly to the revenue increase, with a notable growth in online sales channels.
Competitive Advantages: Coty Inc. holds several competitive advantages, including a diverse brand portfolio and strong global distribution networks. The Prestige segment's operating income increased to $241.5 million, reflecting a 9% growth year-over-year. This performance underscores the effectiveness of its premiumization strategy and brand positioning in the market.
| Growth Driver | Current Performance | Future Projections |
|---|---|---|
| Prestige Segment Revenue | $1,114.1 million (5% increase) | Projected to exceed $7 billion by FY 2025 |
| Consumer Beauty Segment Revenue | $557.4 million (3% decrease) | Improvement expected with new product launches |
| Adjusted Net Income | $128.1 million (73% increase) | EPS projected at $0.60 for FY 2024 |
| Digital Sales Growth | Significant contribution to revenue | Continued emphasis on e-commerce expansion |
| Prestige Segment Operating Income | $241.5 million (9% growth) | Further improvement expected through premiumization |
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Updated on 16 Nov 2024
Resources:
- Coty Inc. (COTY) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Coty Inc. (COTY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Coty Inc. (COTY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.