Earnings Preview: Avon Products - Analyst Blog
February 09 2012 - 7:15AM
Zacks
Avon Products Inc.
(AVP) is scheduled to release its fourth-quarter 2011 results on
Tuesday, February 14, 2012. The Zacks Consensus Estimate is 51
cents a share for the fourth quarter of fiscal 2011, reflecting a
year-over-year estimated decline of 13.6%.
Synopsis of Third
Quarter 2011
Avon Products’ adjusted earnings of
38 cents per share for third-quarter 2011 missed the Zacks
Consensus Estimate of 46 cents and slipped 7.3% from the year-ago
earnings of 41 cents. On a reported basis, including one-time
items, earnings remained flat at 38 cents per share compared with
the year-ago quarter.
The company’s total sales rose 5%
year over year to $2,706.7 million from $2,580.1 million a year
ago. Total revenue also missed the Zacks Consensus Estimate of
$2,840 million.
Avon’s adjusted gross margin fell
60 basis points year over year to 64% as favorable currency impact
coupled with improved pricing was more than offset by higher
product cost. Operating profit reflected an increase of 4%, while
operating margin contracted 20 basis points to 10.3%, attributable
to lower gross margin.
Earnings
Guidance
Battered by the wretched
third-quarter performance and macroeconomic pressures, the company
rolled back its earlier forecast. Avon no longer expects revenues
to increase in mid-single digit in fiscal 2011 with an expansion of
50 to 70 basis points in operating margin.
Zacks
Consensus
The analyst covered by Zacks
expects Avon to post fourth-quarter 2011 earnings of 51 cents a
share, lower than 59 cents delivered in the prior-year quarter.
Currently, the Zacks Consensus Estimate ranges between earnings of
26 cents and 63 cents a share.
For fiscal 2011, the Zacks
Consensus Estimate stood at $1.76 per share, lower than its
previous fiscal earnings of $1.80. The current Zacks Consensus
Estimate ranges between $1.50 and $1.88 per share.
Agreement of
Estimate
For the fourth quarter of fiscal
2011, of the 13 analysts covering the stock, 4 analysts revised
their estimates downward, while none have revised the same in the
opposite direction in the last 30 days. For full fiscal 2011, 4
analysts revised their estimates in negative direction, while 1
analyst revised the same in the positive direction, in the last 30
days.
In the last 7 days, no movement in
estimates has been noticed in either direction for fourth-quarter
2011 or fiscal 2011. This indicates that the analysts do not see
any major catalyst driving the quarterly results.
Magnitude of Estimate
Revisions
With heavy negative affect from
earnings revisions by analysts in the last 30 days, the Zacks
Consensus Estimates for fourth-quarter 2011 has decreased by 2
cents to 51 cents per share while for fiscal 2011 it lowered by 1
cent to $1.76 per share.
However, the magnitude of estimate
revisions for Avon Products depicts a neutral outlook for the
upcoming fourth quarter and fiscal 2011. Over the last 30 days,
estimates for the upcoming quarter and fiscal 2011 have remained
unchanged at 51 cents and $1.76 per share, respectively.
Surprise
History
With respect to earnings surprises,
Avon has missed as well as topped the Zacks Consensus Estimate over
the last four quarters in the range of negative 17.4% to positive
19.4%. The average remained at negative 3%. This suggests that Avon
has missed the Zacks Consensus Estimate by an average of 3% in the
trailing four quarters
Our
Take
We believe that the company’s
initiatives to change the product mix and reposition the business
in the U.S. market will require significant expenditure to support
increased advertising and promotional activities, which may dent
its margins. Furthermore, Avon is a highly leveraged company,
limiting its financial flexibility to drive future growth.
Additionally, Avon competes against
products sold to consumers by other direct-selling companies and
against products sold in the mass market and through prestige
retail channels. The company competes head-to head with
Revlon Inc. (REV).
Currently, Avon retains a Zacks #4
Rank, which translates into a short-term 'Sell' rating. Our
long-term recommendation on the stock remains 'Underperform'.
AVON PRODS INC (AVP): Free Stock Analysis Report
REVLON INC-A (REV): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Avon Products (NYSE:AVP)
Historical Stock Chart
From Sep 2024 to Oct 2024
Avon Products (NYSE:AVP)
Historical Stock Chart
From Oct 2023 to Oct 2024