What: Shares of cosmetics maker Coty Inc. (NYSE:COTY) cracked up in May, falling 13% according to data from S&P Global Market Intelligence. The company delivered an underwhelming earnings report, and said costs resulting from its purchase of Procter & Gamble's beauty brands would be greater than expected.

COTY Chart

COTY data by YCharts

So what: As you can see from the chart above, shares tumbled on May 3 after the company reported earnings and made the announcement regarding the P&G transaction-related costs, falling 10% that day and slipping another 5% over the next two sessions. For the third quarter, Coty posted an adjusted EPS of $0.09 against estimates of $0.12, and revenue increased 2% to $950.7 million, missing expectations at $977.3 million. 

CEO Bart Becht said the quarter was in line with expectations, and that power brands outperformed the overall business. 

Separately, Coty said costs to integrate P&G's beauty brands would be $1.2 billion over the next four years instead of $500 million over the next three years as originally projected. It also said it expected the deal to be completed in October.

Now what: In addition to the higher estimates for the costs to integrate brands like Cover Girl, Coty also increased its expectations for the synergies from the acquisition. It anticipates cost savings of $780 million annually, and accretive EPS of $0.49 to $0.54. Investors, however, seem focused on the up-front expenditures. 

Acquiring P&G's beauty business will remake Coty, doubling its revenue as it brings on more than 40 brands. Executing the process of folding those brands into its business successfully will be of the utmost importance. If management can do so, and hit its EPS and cost-savings projections, the deal should pay off in the long run for Coty investors. 

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