What happened
Shares of Coty (COTY 0.73%) jumped on a rocket ship last month, as the cosmetics maker's stock surged on a better-than-expected earnings report, demonstrating traction in its turnaround efforts. An announcement that it would complete the sale of its Wella professional hair care business to KKR also helped lift the consumer discretionary stock .
According to data from S&P Global Market Intelligence, the stock finished the month up 148%, in part a reflection of how far it had fallen earlier in the year.
Image source: Coty.
The stock moved higher over the much of the month, though two events drove the majority of the surge along with positive vaccine news.
So what
Coty shares jumped 22% on Nov. 6, after the company reported first-quarter earnings. Sales were down sharply in the quarter, falling 19% on a comparable basis, as the beauty industry has been hit hard by the pandemic, but results still topped expectations. The company also took steps toward shoring up its balance sheet. Overall revenue fell 13% to $1.69 billion, easily beating estimates at $1.08 billion, and the company cut costs to deliver a surprise profit, posting adjusted earnings per share of $0.11 per share, compared with expectations of a $0.05 loss.
The news also helped stoke confidence in new CEO Sue Nabi, the company's third chief executive in a year, who said, "Our first-quarter results are a testament that a stronger, more focused and more flexible Coty is emerging in the middle of the COVID-19 pandemic and better prepared to face any future market disruptions."
Later in the month, the stock got another bump when it said its sale of a 60% stake in the Wella business for $2.5 billion would be completed by the end of November. Coty will retain the remaining 40% stake in the business and plans to use $2 billion of the proceeds to pay down debt, strengthening its capital structure. Shares climbed 8% on Nov. 13 on that news.
Now what
Coty said on Dec. 1 that the Wella sale had been completed and the company expects its net debt to fall from $7.9 billion to $5 billion by the end of the quarter. That along with the expected end of the pandemic as vaccines go into distribution should help lift Coty shares in the coming months. The company still faces headwinds in its turnaround efforts and needs to prove the wisdom of its deals with Kylie Jenner and Kim Kardashian, but it's not surprising to see the stock jump last month given the improving macroeconomic picture and better-than-expected quarterly results.
