Coty Earnings: Growth Led by Premium Fragrance Strength, but Skincare Still Lagging  

We plan to maintain our $11.40 and EUR 10.40 per share fair value estimates for no-moat Coty after digesting its third-quarter results. Organic sales and adjusted operating profits rose 10% and 17%, respectively, fueled by double-digit sales growth in prestige fragrance and efficiency gains. However, we remain concerned about Coty’s long-term outlook, given the beautymaker’s slow progress in expanding beyond the small-fragrance category. As such, we see no need to change our 10-year forecasts for 5% sales CAGR and 14% average operating margins and view shares as fairly valued.