Shares of Coty (NYSE: COTY) were flying higher after the cosmetics maker posted better-than-expected results in its second quarter as the company recovers from supply chain issues that sank in the first quarter. Axis or 1:27 p.m. EST, the stock was up 28.1%.
The cover girl parent said organic sales, which strip out the impact of divestitures, acquisitions, and currency translation, ticked up 0.7%, a significant improvement from a decline or 7.7% in the first quarter. However, the company said special factors accounted for 2% of the organic growth, without which it would have been negative. Reported revenue still fell 4.8% to $ 2.51
Reflecting a trend in the broader beauty industry as seen in strong results from Procter & Gamble and Estee Lauder Coty continued to deliver impressive growth in its luxury segment where organic sales increased 10.8%. Consumer beauty struggled once again, with organic sales down 7.3%, which the company blamed on broader weakness in the mass beauty market in the U.S. and Europe.
Adjusted operating income declined 7% to $ 322.3 million, while adjusted earnings per share fell from $ 0.32 to $ 0.24, though that still beat expectations at $ 0.22. This year accounted for $ 0.05 of the decline in adjusted EPS.
New CEO Pierre Laubies summed up the company's position, saying: "There are clear opportunities to improve how we run our company in order to enhance the quality of our business model, giving us the time that we need to address our more strategic issues. I must stress that we are confident that we can return to a path of sustainable growth, we are also realistic that it will take time to achieve this outcome. "
Coty stock has plunged since 2015, as its acquisition of Cover Girl and 42 other brands from Procter & Gamble has proven difficult to integrate and weighed on performance. In the second quarter, Coty took a nearly $ 1 billion asset impairment, mostly from goodwill.
Still, its luxury segment remains strong, and the professional business is solid. Coty shares have fallen so far that the stock is arguably a deep value play now, as it pays a dividend yield near 6% even after today's jump. The company appears to be moving in the right direction, and Laubies is taking a clear-eyed approach to the business. Considering the low bar the company faces, the stock could easily be climbed further from here.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool is short shares of Procter & Gamble. The Motley Fool has a disclosure policy.