U.S. Markets open in 6 hrs 48 mins

Avon Upgraded to Strong Buy

Zacks Equity Research

On Jun 4, Zacks Investment Research upgraded Avon Products Inc. (AVP) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Avon has been witnessing rising earnings estimates on the back of better-than-expected bottom-line results in the first quarter of 2013. For the second consecutive quarter, this global beauty company’s earnings per share beat the Zacks Consensus Estimate after reporting lower-than-expected earnings in the past 6 quarters. Moreover, we believe that Avon’s strategic move of improving the health of its balance sheet through refinancing activities helped in the upward movement of estimates.

Avon posted first-quarter adjusted earnings of 26 cents per share on Apr 30, easily beating the Zacks Consensus Estimate of 14 cents, and increasing twofold from the comparable year-ago quarter number of 10 cents.

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.

As part of its strategy, Avon decreased its quarterly dividend by 6 cents to 23 cents per share and now aims to slash costs by $400 million through 2016. We believe that the Avon’s turnaround strategies are paying off, as is evident from its improved operating results in the last 2 quarters.

The Zacks Consensus Estimate for 2013 increased 11.7% to $1.15 per share as most of the estimates were revised upward over the last 60 days. Moreover, for 2014, the estimates were revised upward over the same time-frame, thereby lifting the Zacks Consensus Estimate by 6.9% to $1.40 per share.

Other Stocks to Consider

Apart from Avon, Nu Skin Enterprises Inc. (NUS) with a Zacks Rank #1 (Strong Buy) is performing well in the soaps-cosmetics industry. Other stocks in the same sector that warrants a look include International Flavors & Fragrances Inc. (IFF) and Inter Parfums Inc. (IPAR), both of which carry a Zacks Rank #2 (Buy).

Read the Full Research Report on AVP

Read the Full Research Report on IFF

Read the Full Research Report on IPAR

Read the Full Research Report on NUS

Zacks Investment Research

More From Zacks.com