We expect Avon Products Inc. (AVP), the world’s leading beauty company to beat expectations when it reports first-quarter 2013 results on Apr 30.
Why a Likely Positive Surprise?
Our proven model shows that Avon Products may beat the earnings because it has the right combination of two key components.
Positive Zacks ESP: Avon Products currently has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +14.29%. This is because the Most Accurate Estimate stands at 16 cents, while the Zacks Consensus Estimate is pegged at 14 cents.
Zacks #2 Rank (Buy):Note that stocks with a Zacks Rank #1, #2 and #3 have a higher chance of beating the earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Avon Products’ Zacks Rank #2 (Buy) and Earnings ESP of +14.29% makes us confident of a positive earnings beat on Apr 30.
What is Driving the Better-than-Expected Earnings?
Of late, Avon has been encountering challenges on various fronts including declining top and bottom lines and a 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. We believe that the company’s strategies are paying off, which is evident from its fourth-quarter 2012 operating results. After reporting dismal results over the past 6 quarters, Avon posted better-than-expected total revenue and earnings for the fourth quarter.
Other Stocks to Consider
Avon Products is not the only firm looking up this earnings season. The following companies are also likely to beat earnings estimates in the to-be-reported quarter:
Church & Dwight Co. Inc. (CHD) with Earnings ESP of +1.39% and a Zacks Rank #3 (Hold).
Dean Foods Company (DF) with Earnings ESP of +3.85% and a Zacks Rank #3 (Hold).
Zumiez Inc. (ZUMZ) Earnings ESP of +9.09% and a Zacks Rank #3 (Hold).
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