RJ downgrades Coty; sees tepid earnings season for beauty and personal care sector

Investing.com -- Raymond James downgraded Coty Inc (NYSE:COTY) to “Market Perform” from “Outperform,” flagging peak margins, softening demand in key categories, and tough year-ago comparisons in its prestige fragrance segment. 

The brokerage expects a subdued first-quarter earnings season for the broader beauty, personal care, and household products sector, citing slowing consumer demand and rising cost pressures across the U.S., Europe, and Latin America.

While some demand recovery is expected later in the year, analysts do not believe most companies can offset first-half shortfalls.

Coty’s downgrade comes amid growing concerns about the sustainability of prestige demand, continued weakness in consumer beauty, particularly Cover Girl, and slower margin expansion after significant gains since 2019.

Coty shares have already priced in much of the near-term headwinds, the firm said.

Raymond (NSE:RYMD) James also trimmed its earnings estimates across several names including Estée Lauder, Newell Brands, Olaplex, and Spectrum Brands, citing demand deceleration and tariff-related risks.

The U.S., often the highest-margin market for these companies, has shown the sharpest slowdown, the brokerage noted. It also warned that firms with significant China sourcing, including e.l.f. Beauty (NYSE:ELF), Helen of Troy, may delay issuing full-year guidance until there is more clarity on tariffs.

Still, Raymond James remained constructive on select names. It highlighted Procter&Gamble (NYSE:PG) for its portfolio diversity and cost efficiency, and Church&Dwight (NYSE:CHD) as a beneficiary of potential consumer trade-down trends.

Among beauty stocks, the firm maintained a favorable view on ELF, Ulta Beauty (NASDAQ:ULTA), and Bath&Body Works (NYSE:BBWI) despite trimming estimates to reflect the evolving consumer backdrop.