Coty stock tumbles as lack of visibility, RBC downgrade overshadow Q4 beat

Investing.com -- Coty (NYSE: COTY) shares have dropped around 20% in premarket trading Thursday after the beauty group paired better-than-expected fourth-quarter results with a soft outlook, prompting a downgrade at RBC Capital Markets.

Fourth-quarter net revenue rose 1% to $1.27 billion, including a 3% benefit from foreign exchange. On a like-for-like basis, sales fell 1%, which the company said included an estimated 1% headwind from the conflict in the Middle East. Adjusted EBITDA dropped 26% to $93.6 million, while the adjusted loss per share narrowed to $0.02 from $0.05.

Coty guided to a low- to mid-single-digit like-for-like revenue decline in the first quarter, adjusted gross margin contraction of 50 to 100 basis points, and adjusted earnings excluding the equity swap of $0.11 to $0.13 per share. The company declined to give full-year guidance, describing fiscal 2027 as a transition year.

RBC's Nik Modi downgraded the stock to Sector Perform and slashed the price target to $3 from $8 in a note following the earnings release.

"While F4Q'26 results were better than expected, the forward commentary from management indicated to us that the path back to top- and bottom-line growth remains unclear," he wrote.

Modi pointed to the early termination of the Gucci license, the need for a further fixed cost savings program to offset dilution, and the ongoing strategic review of Consumer Beauty.

Coty also announced a CFO transition, with Soraya Benchikh succeeding Laurent Mercier from Sept. 1.

"We are hard-pressed to see where the upside will come from," Modi added.

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