Avon Upgraded to Strong Buy - Analyst Blog
March 21 2013 - 6:10AM
Zacks
On Mar 19, Zacks Investment
Research upgraded Avon Products Inc. (AVP) to a
Zacks Rank #1 (Strong Buy).
Why the
Upgrade?
Avonhas been witnessing rising
earnings estimates on the back of better-than-expected
fourth-quarter 2012 results. For the first time the global beauty
company’s earnings per share surpassed the Zacks Consensus Estimate
after reporting lower-than-expected earnings in 6 consecutive
quarters. Moreover, we believe that the company’s strategic move
toward improving the health of the balance sheet through
refinancing activities helped induce an upward movement in the
estimates.
On Feb 12, Avon posted
fourth-quarter adjusted earnings of 37 cents per share,
significantly beating the Zacks Consensus Estimate of 27 cents. The
company’s total revenue of $2,999.1 million for the quarter also
beat the Zacks Consensus Estimate of $2,996.0 million.
Of late, Avon has been encountering
challenges on various fronts including declining top and bottom
lines and highly-leveraged balance sheet. In Nov 2012, Avon
outlined some strategic measures focused on accelerating the
top-line growth, trimming down costs and improving working capital.
Management is in the process of easing business issues and
directing the company toward the growth trajectory, while reviving
its competitive position among peers.
As part of its strategy, Avon
slashed its quarterly dividend by 6 cents to 23 cents per share and
has set a target of bringing down costs by $400 million through
2015. We believe that the company’s turnaround strategies are
paying off, which is evident from its recently released
fourth-quarter 2012 operating results. Moreover, Avon recently
culminated its $2.5 billion worth of refinancing activities, which
is expected to provide financial flexibility to support the
company’s turnaround strategies.
The Zacks Consensus Estimate for
fiscal 2013 increased 10.9% to $1.02 per share as most of the
estimates were revised higher over the last 60 days. Moreover, for
fiscal 2013, the estimates were revised higher over the same time
frame, lifting the Zacks Consensus Estimate by 19.1% to $1.31 per
share.
Other Stocks to
Consider
Besides Avon, other stocks in the
soaps-cosmetics industry that are currently performing well include
International Flavors & Fragrances Inc. (IFF),
The Est (EL) and Nu Skin Enterprises
Inc. (NUS). All these companies carry a Zacks Rank #2
(Buy).
AVON PRODS INC (AVP): Free Stock Analysis Report
ESTEE LAUDER (EL): Free Stock Analysis Report
INTL F & F (IFF): Free Stock Analysis Report
NU SKIN ENTERP (NUS): Free Stock Analysis Report
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