What to Watch When Coty Reports 1Q Earnings

Coty (COTY) is set to release its 2017 fiscal first-quarter results before Wednesday's market open. Wall Street is forecasting earnings will decline year over year while revenue will be slightly higher than last year.

Analysts surveyed by FactSet are looking for adjusted earnings of 33 cents per share on revenue of $1.14 billion. During the same quarter a year ago, the New York-based beauty products company posted adjusted earnings of 59 cents per diluted share on revenue of $1.11 billion.

Shares of Coty, whose brands include Sally Hansen, Rimmel London, OPI and CoverGirl, recently fell nearly 1% to $22.

Coty has found sustained growth difficult since its initial public offering in 2013, but its acquisitions of French cosmetics company Bourjois and Hypermarcas' beauty division in Brazil are helping, according to Bloomberg Intelligence Senior Industry Analyst Deborah Aitken.

In addition, last month the company closed its acquisition of Procter & Gamble's (PG)  specialty beauty business, which includes fine fragrance, color cosmetics and hair color.

"The deal for 41 Procter & Gamble beauty brands is complete and sets the company's biggest challenge. Increasing its scale and focus, combined sales are over $9 billion, propelling Coty to global No. 3 in beauty, behind L'Oreal and Estee Lauder  (EL)  from eighth after P&G," Aitken wrote in a recent analyst note.

This means Coty will be positioned ahead of Avon Products  (AVP) , Shiseido, Beiersdorf and Unilever.

"Post deal distractions, its pure-play focus in faster-growth beauty should raise its growth profile...With a new CEO and leaner structure, its pure beauty focus could raise its ranking," Aitken noted.

Camillo Pane took over as CEO last month. Previously, Pane was the executive vice president of Coty's category development. Bart Becht, the former interim CEO, continues to be chairman.

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