Coty's beat on low expectations are reason for its 16% premarket rally: Wells Fargo
Coty Inc.'s earnings beat has sparked an 16% rally in its stock in premarket trade Friday, but while the cosmetics giant is making progress on a return to growth, it still has a long way to go, Wells Fargo analyst Joe Lachky said Friday. Coty beat profit estimates and its free cash flow was positive, he said, bu guidance was limited and management said it expects fiscal 2019 adjusted EBIT to be moderately below fiscal 2018, compared with a prior call for positive growth, he wrote. "New CEO Laubies is focused on gross margin improvement and sustained top-line growth, but stressed it will take time to achieve sustainable growth," said Lachky. "Overall, expectations were extremely low with COTY shares -15% vs. S&P -4% over the last 3 months. The lack of new surprises should warrant a relief rally and we expect shares to trade higher today." Coty shares have fallen 64% in the last 12 months, while the S&P 500 has gained 4.9%. Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.