NEW YORK (AP) -- A Wells Fargo analyst upgraded shares of Avon Tuesday, saying the beauty products seller is starting to turn its business around and could surpass investor expectations.
Analyst Chris Ferrara upgraded Avon Products Inc.'s shares to "Outperform" from "Market Perform." He set a target range of $25 to $26 per share, up from $21 to $23.
Avon shares rose 8 cents to $20.05 in midday trading. Its stock has already advanced nearly 40 percent in 2013.
Ferrara's profit expectations exceed Wall Street's average estimate.
He expects Avon to report net income of $1.13 per share this year and $1.37 per share in 2014. FactSet says analysts are forecasting net income of $1.10 per share in 2013 and $1.33 per share in 2014.
"We think Avon is at the very beginning of a long turnaround after years of prior mismanagement," Ferrara wrote.
Weak sales have hurt Avon's profitability. In the second quarter its net income fell by almost half because of unfavorable currency exchange rates and the sale at a loss of its Silpada jewelry business. The company has made several management changes recently, with longtime head Andrea Jung stepping down as chairwoman and CEO in 2012. Former Johnson & Johnson executive Sheri McCoy is now CEO and Doug Conant is now chairman.
By 2016 Avon intends to achieve revenue growth in the mid-single digits and cut annual costs by $400 million. It is leaving unprofitable markets and streamlining its operations.