More Support Arrives for a Portfolio Holding's Seasonally Strong H2

* e.l.f. Beauty blew away consensus expectations citing strength in skincare and color cosmetics.

* e.l..f.'s outlook paired with those from Inter Parfums and IFF points to a vibrant H2 outlook for Coty.

* Coty typically delivers 70% of its fiscal-year profits in the September-December quarters.

Shares of e.l.f. Beauty ELF are under some pressure Friday morning for the same reason Dutch Bros BROS was Thursday. ELF's June-quarter results blew away consensus expectations, and while it lifted its outlook for the coming year, that revised forecast only matched what the market was looking for. What stood out to us, however, was ELF's guidance that its current quarter will be above the 26%-28% top-line growth it sees for its current fiscal year.

As we think about that guidance, let’s remember the differences between ELF's business and that of portfolio holding Coty COTY. ELF's is a cosmetics company, and its June-quarter benefited from notable strength in skincare and color cosmetics. Those are markets for Coty, but unlike Coty, ELF does not participate in the fragrance market. Recent results from Inter Parfums IPAR and comments from International Flavors & Fragrances IFF about its fine fragrance business point to continued strength for that part of Coty’s business.

Amalgamating the comments and respective outlooks from ELF, IPAR and IFF, the prospects for Coty to deliver seasonally strong guidance into the holiday shopping season remain high. Typically, Coty delivers 52%-56% of its fiscal-year sales in the September-December quarters, but 70% of its operating income and the majority of its fiscal year EPS. Capturing that is one of the reasons why we’ve remained patient with the shares. The current risk-reward to our $14 price target in COTY shares is one newer members may want to take advantage of. 

At the time of publication, TheStreet Pro portfolio was long BROS and COTY.