What Happened?
Shares of beauty products company Coty (NYSE: COTY) fell 5.3% in the morning session after the company announced CEO Sue Nabi would step down, prompting a downgrade from Evercore ISI.
The beauty company named Procter & Gamble veteran Markus Strobel as the new interim CEO. This leadership change came at a time when the company was already facing pressure on its mass-market business and its shares had fallen significantly over the previous year. Following the news of the CEO's departure, Evercore ISI downgraded Coty's stock from "Outperform" to "In Line." The firm noted the change occurred at a "pivotal juncture" for the company, which was conducting a review of its Consumer division. This segment was cited as the source for most of Coty's operational difficulties and negative investor sentiment.
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What Is The Market Telling Us
Coty’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock dropped 19.4% on the news that the company reported a surprise loss for its second quarter as key profitability metrics declined.
The beauty products company posted an adjusted loss of $0.05 per share for its second quarter, missing Wall Street's expectation for a $0.02 profit. While revenue of $1.25 billion topped analyst estimates, it still represented an 8.1% decline year-over-year. Furthermore, the company's operating margin decreased to 1.2% from 2.5% in the same period last year, and it burned through $131.8 million in cash. Organic revenue, which removes the effects of currency fluctuations and acquisitions, also fell by 9% year-over-year. Looking ahead, analysts expect revenue to remain flat over the next 12 months, an underwhelming projection that suggests demand challenges may persist. Overall, the surprise loss and weakening profitability metrics overshadowed the revenue beat, disappointing investors.
Coty is down 56.6% since the beginning of the year, and at $2.98 per share, it is trading 60.9% below its 52-week high of $7.61 from January 2025. Investors who bought $1,000 worth of Coty’s shares 5 years ago would now be looking at an investment worth $401.48.
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