Zacks Industry Outlook Highlights Coty, Helen of Troy, European Wax Center and Nu Skin

Coty (COTY) came out with quarterly earnings of $0.15 per share, missing the Zacks Consensus Estimate of $0.19 per share. This compares to earnings of $0.09 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -21.05%. A quarter ago, it was expected that this beauty products company would post earnings of $0.04 per share when it actually produced a loss of $0.03, delivering a surprise of -175%.

Over the last four quarters, the company has surpassed consensus EPS estimates just once.

Coty, which belongs to the Zacks Cosmetics industry, posted revenues of $1.67 billion for the quarter ended September 2024, missing the Zacks Consensus Estimate by 0.33%. This compares to year-ago revenues of $1.64 billion. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Coty shares have lost about 39.3% since the beginning of the year versus the S&P 500's gain of 21.2%.

What's Next for Coty?

While Coty has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Coty: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.22 on $1.76 billion in revenues for the coming quarter and $0.55 on $6.35 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Cosmetics is currently in the bottom 20% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, European Wax Center, Inc. (EWCZ), is yet to report results for the quarter ended September 2024.

This company is expected to post quarterly earnings of $0.06 per share in its upcoming report, which represents a year-over-year change of -33.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

European Wax Center, Inc.'s revenues are expected to be $54.65 million, down 1.9% from the year-ago quarter.

Zacks Investment Research

Companies in the Zacks Cosmetics industry are facing challenges due to a tough consumer environment, with inflationary pressures causing consumers to become more selective in their spending habits. As a result, many beauty industry players are experiencing a decline in consumer demand. In addition, companies in the cosmetics sector are grappling with escalated production costs, further impacting their profitability and operational efficiency.

Despite these challenges, companies like Coty Inc. COTY, Helen of Troy Limited HELE, European Wax Center, Inc. EWCZ and Nu Skin Enterprises, Inc. NUS have seen positive results from initiatives focused on enhancing digital capabilities and driving innovation.

About the Industry

The Zacks Cosmetics industry includes companies that provide beauty and personal care products. Players in the industry manufacture, distribute, sell and market skincare, fragrance, makeup and hair care products. Many firms in the market sell products via sales representatives, whereas some do the same through retailers, independent and chain drug stores and pharmacies, upscale perfumeries, department stores and beauty salons. These companies also operate through retailer websites, third-party distributors and in-flight and duty-free shops. Some products offered by industry participants include moisturizers, serums, toners and cleansers under skincare; perfume sprays, candles and soaps under fragrance; lipsticks, mascaras, powders, eye shadows, foundation and nail polishes under makeup; and shampoos, conditioner and hair color products under hair care.

Trends Shaping the Future of the Cosmetics Industry

Tough Economic Landscape: Cosmetic companies are navigating a turbulent economic environment stemming from underlying inflationary pressures. Elevated costs for packaging, ingredients, and transportation are increasing production expenses and eroding profit margins. At the same time, shifting consumer behavior is complicating matters further. As a result of heightened living costs, consumers are becoming more selective with their purchases, focusing on essential goods while cutting back on non-essential items like cosmetics. This trend is creating a challenging demand environment for several cosmetic companies as they navigate higher operational costs and changing consumer priorities in this highly competitive beauty space.

International Risk Factors: Several industry players face potential risks due to their global footprint, including exposure to adverse foreign currency fluctuations. Political unrest, like turmoil related to geopolitical events, might disrupt market access and operational continuity. Trade conflicts, tariffs, sanctions and other restrictions may also affect their performance.

Innovation & Digitization - Major Drivers: Innovation and digitization are driving growth in the beauty and skincare industry. Consumers are increasingly drawn to unique products that blend cutting-edge technology with expert scientific formulations. To meet these evolving demands, cosmetic companies are constantly innovating and launching new offerings. The rising consumer interest in organic and clean beauty products has further fueled market growth. Enhancing e-commerce capabilities is a key priority, with advancements like virtual try-on tools, seamless digital payment systems, and enhanced online marketing strategies gaining traction. Additionally, many beauty brands are expanding their product portfolios through strategic acquisitions and partnerships to stay competitive in a fast-evolving market.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Cosmetics industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #204, which places it in the bottom 19% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s position in the bottom 50% of the Zacks-ranked industries leads to a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since the beginning of September 2024, the industry’s consensus estimate for current financial year earnings has decreased 9.8%.

Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.

Industry Vs. Broader Market

The Zacks Cosmetics industry has underperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staples sector over the past year.

The industry has declined 35.6% over this period against the S&P 500’s growth of 30.7%. The broader sector has gained 7.6% in the said time frame.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month Price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 20.99X compared with the S&P 500’s 21.60X and the sector’s 17.44X.

In the past five years, the industry has traded as high as 43.68X and as low as 20.99X, with the median being 31.84X, as the chart below shows.

Price-to-Earnings Ratio (Past 5 Years)

4 Cosmetics Stocks Worth Watching

Coty: This manufacturer, marketer and distributor of beauty products carries a Zacks Rank #3 (Hold). Coty continues to benefit from robust growth in the global beauty market, driven by a strong brand presence and consumer demand for fragrances, cosmetics and skincare. With a focus on six growth pillars, including growing Consumer Beauty and fragrances, the company demonstrates a proactive approach to sustainable growth. By investing in core categories like skincare and expanding its e-commerce capabilities, COTY aligns with evolving consumer preferences. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Coty’s commitment to innovation and strategic partnerships enhances its competitive position across the beauty market. In addition, management is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. The Zacks Consensus Estimate for COTY’s current fiscal year earnings per share (EPS) has moved down by a penny in the past 30 days at 55 cents. Coty’s shares have dropped 23.9% in the past year.

Price and Consensus: COTY

Helen of Troy: This provider of consumer products across Beauty, Housewares and Health & Home segments carries a Zacks Rank of 3. Helen of Troy has demonstrated its commitment to growth by focusing on brand revitalization, marketing effectiveness, and innovation across home, outdoor, beauty, and wellness categories. The company is investing in its Leadership Brands, a portfolio of market-leading brands. Significant expansion in key international markets and the optimization of distribution networks are expected to bolster HELE’s future sales performance. In addition, Helen of Troy’s global restructuring plan, Project Pegasus, is designed to improve efficiency and reduce costs.

The Zacks Consensus Estimate for Helen of Troy’s current fiscal year EPS has moved up by a couple of cents in the past 30 days at $7.18. The stock has dropped 35.6% in the past year.

Price and Consensus: HELE

European Wax Center, Inc.: The largest and fastest-growing franchisor and operator of out-of-home waxing services in the United States carries a Zacks Rank #3. The company’s franchise partners remain highly committed to long-term development, providing a solid foundation for continued expansion. EWCZ has successfully utilized advanced data analytics to optimize its marketing strategies and enhance return on investment.

European Wax Center has launched key initiatives like Operation Elevate, which focuses on improving the performance of select centers through targeted training, coaching, and development. EWCZ’s laser hair removal pilot program is also proving to be a valuable addition, expanding its service offerings and driving growth. The Zacks Consensus Estimate for European Wax’s current fiscal year EPS has remained unchanged in the past 30 days at 32 cents. EWCZ’s stock has declined 49% in the past year.

Price and Consensus: EWCZ

Nu Skin: This Zacks Rank #3 company develops and distributes a wide range of premium cosmetics, beauty, personal care and wellness products. Nu Skin is driving market expansion through strategic initiatives designed to boost brand presence and capture new opportunities. These efforts include integrated marketing strategies, a stronger digital presence, and partnerships with third-party marketplaces to enhance customer engagement and conversion. The company is also focusing on expanding into emerging markets, leveraging localized products and tailored business strategies to meet the specific needs of these regions.

With the use of cutting-edge technology and well-planned product programs, Nu Skin aims to increase its market share while maintaining steady growth. A key element of the company's strategic vision is its Rhyz business, which has shown remarkable growth and now plays a vital role in its revenue generation. The Zacks Consensus Estimate for NUS’ current fiscal year earnings has remained unchanged at 78 cents in the past 30 days. Shares of Nu Skin have declined 62.7% in the past year.

Price and Consensus: NUS

Zacks Investment Research

Nu Skin Enterprises, Inc. NUS is likely to register a decline in top and bottom lines when it reports third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for revenues is pegged at $444.1 million, suggesting a decrease of nearly 11% from the prior-year quarter’s reported figure. The consensus mark for earnings has remained unchanged in the past 30 days at 20 cents per share, indicating a decline of 64.3% from the figure reported in the year-ago quarter. NUS has a trailing four-quarter earnings surprise of 27.9%, on average.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Things to Consider Ahead of NUS’ Upcoming Results

Nu Skin has been battling macroeconomic obstacles, which lingered in the second quarter of 2024. The company’s performance was hurt by macroeconomic headwinds across most regions, which weighed on consumer spending and customer acquisition, especially for premium products. The company also grapples with pressures in the direct selling industry.

These headwinds, along with foreign adverse currency fluctuations, raise concerns about the quarter to be reported. For the third quarter of 2024, the company expects revenues between $430 million and $465 million, which suggests a decline of 14% to 7% from the year-ago quarter’s reported level. The company expects adjusted earnings of 15-25 cents a share in the third quarter.

However, Nu Skin’s Rhyz business has been performing well. A focus on innovation, brand building and cost management has been aiding. Nu Skin has also been gaining from its key strategic pillars, Products, Programs and Platforms.

Nu Skin Enterprises, Inc. Price, Consensus and EPS Surprise

Nu Skin Enterprises, Inc. price-consensus-eps-surprise-chart | Nu Skin Enterprises, Inc. Quote

Earnings Whispers for NUS

Our proven model doesn’t conclusively predict an earnings beat for Nu Skin this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Nu Skin has an Earnings ESP of 0.00% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Some Stocks With Favorable Combination

Here are some companies worth considering, as our model shows that these have the correct combination to beat on earnings this time around.

Ollie's Bargain Outlet Holdings, Inc. OLLI currently has an Earnings ESP of +1.50% and a Zacks Rank of 3. OLLI's top line is anticipated to increase year over year when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $519 million, which implies 8.1% growth from the year-ago quarter’s reported figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is expected to register an increase in the bottom line. The consensus estimate for Ollie's Bargain’s third-quarter earnings is pegged at 57 cents per share, indicating 11.8% growth from the year-ago quarter. OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.

Sweetgreen, Inc. SG currently has an Earnings ESP of +4.76% and a Zacks Rank of 3. SG is likely to register growth in its top and bottom lines when it reports third-quarter 2024 results. The Zacks Consensus Estimate for Sweetgreen’s quarterly revenues is pegged at $173.7 million, which indicates an increase of 13.2% from the figure reported in the prior-year quarter.

The consensus estimate for SG’s bottom line is expected to increase 27.3% from the year-ago quarter’s number. Sweetgreen delivered a negative average earnings surprise of almost 12% in the trailing four quarters.

Jack in the Box Inc. JACK presently has an Earnings ESP of +1.28% and a Zacks Rank of 3. The company is likely to register a top-line decline when it reports fiscal fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for JACK’s quarterly revenues is pegged at $357.9 million, which indicates a dip of 3.9% from the figure reported in the prior-year quarter.

The consensus estimate for Jack in the Box’s quarterly earnings has declined by 2 cents over the past 30 days to $1.12 per share. The figure indicates growth of 2.8% from the year-ago quarter’s number. JACK delivered an average earnings surprise of 1.7% in the trailing four quarters.

Zacks Investment Research

Coty Inc. COTY is likely to register growth in its top and bottom lines when it reports first-quarter fiscal 2025 earnings on Nov. 6. The Zacks Consensus Estimate for revenues is pegged at $1.68 billion, suggesting an increase of 2.2% from the prior-year reported figure. The consensus mark for earnings has declined a penny in the past 30 days to 19 cents per share, indicating a rise of 111.1% year over year. COTY has a trailing four-quarter negative earnings surprise of 53.4%, on average.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Things to Consider Ahead of COTY’s Upcoming Results

Coty has been reaping benefits from brand strength, along with robust momentum in the global beauty market. Constant innovation and strategic partnerships have been working well for the company. These trends highlight consumers' enduring preference for beauty as a vital part of their well-being. Consumers’ demand for fragrances, cosmetics and skincare products and their engagement in both physical stores and online have been the key drivers.

Coty recently unveiled preliminary results for the first quarter of fiscal 2025, wherein sales grew approximately 4-5% on a like-for-like basis, below the company’s earlier estimate of 6%. Management stated that the global beauty market has shown solid growth, yet the growth rates have dipped slightly. The prestige fragrance segment is thriving, driven by increases in both volume and pricing strategies. In contrast, the mass beauty category is facing slower growth, thanks to waning unit demand. While many regions experience resilient beauty growth, the U.S. market saw a slowdown in the latter half of the fiscal first quarter.

While Coty supports core icons and invests in new launches, a rise in costs and expenses, if not controlled, might have dented margins.

Coty Price, Consensus and EPS Surprise

Coty price-consensus-eps-surprise-chart | Coty Quote

Earnings Whispers for COTY

Our proven model doesn’t conclusively predict an earnings beat for Coty this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Coty carries a Zacks Rank #3 and has an Earnings ESP of -5.17% at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Some Stocks With the Favorable Combination

Here are some companies worth considering, as our model shows that these have the correct combination to beat on earnings this time around.

Ollie's Bargain Outlet Holdings, Inc. OLLI currently has an Earnings ESP of +1.50% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

OLLI's top line is anticipated to increase year over year when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $519 million, which implies 8.1% growth from the year-ago quarter’s reported figure.

The company is expected to register an increase in the bottom line. The consensus estimate for Ollie's Bargain’s third-quarter earnings is pegged at 57 cents per share, indicating 11.8% growth from the year-ago level. OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.

Sweetgreen, Inc. SG currently has an Earnings ESP of +4.76% and a Zacks Rank of 3. SG is likely to register growth in its top and bottom lines when it reports third-quarter 2024 results. The Zacks Consensus Estimate for Sweetgreen’s quarterly revenues is pegged at $173.7 million, which indicates an increase of 13.2% from the figure reported in the prior-year quarter.

The consensus estimate for SG’s bottom line is expected to increase 27.3% year over year. Sweetgreen delivered a negative average earnings surprise of almost 12% in the trailing four quarters.

Jack in the Box Inc. JACK presently has an Earnings ESP of +1.28% and a Zacks Rank of 3. The company is likely to register a top-line decline when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for JACK’s quarterly revenues is pegged at $357.9 million, which indicates a dip of 3.9% from the figure reported in the prior-year quarter.

The consensus estimate for Jack in the Box’s quarterly earnings has declined 2 cents over the past 30 days to $1.12 per share. The figure indicates growth of 2.8% from the year-ago reported number. JACK delivered an average earnings surprise of 1.7% in the trailing four quarters.

Zacks Investment Research

Estee Lauder (EL) came out with quarterly earnings of $0.14 per share, beating the Zacks Consensus Estimate of $0.09 per share. This compares to earnings of $0.11 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 55.56%. A quarter ago, it was expected that this beauty products company would post earnings of $0.25 per share when it actually produced earnings of $0.64, delivering a surprise of 156%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Estee Lauder, which belongs to the Zacks Cosmetics industry, posted revenues of $3.36 billion for the quarter ended September 2024, missing the Zacks Consensus Estimate by 0.29%. This compares to year-ago revenues of $3.52 billion. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Estee Lauder shares have lost about 40.4% since the beginning of the year versus the S&P 500's gain of 21.9%.

What's Next for Estee Lauder?

While Estee Lauder has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Estee Lauder: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $1.09 on $4.29 billion in revenues for the coming quarter and $2.95 on $15.66 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Cosmetics is currently in the bottom 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, European Wax Center, Inc. (EWCZ), is yet to report results for the quarter ended September 2024.

This company is expected to post quarterly earnings of $0.06 per share in its upcoming report, which represents a year-over-year change of -33.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

European Wax Center, Inc.'s revenues are expected to be $54.65 million, down 1.9% from the year-ago quarter.

Zacks Investment Research