Cosmetics maker Avon is trading flat after reporting that profits only increased 7% in the third quarter. This is a core emerging markets consumer play and could be setting up for a buy.
AVP earned 37 cents per share during the period, but analysts had expected somewhat better results. Shares drifted in a tight range.
Significantly, the weak dollar bit into the company's bottom line by about 2%, making this benchmark of the global consumer markets yet another victim of the currency wars. While most global companies are complaining about their native currencies being too strong, AVP is a major importer and so suffered from the weaker U.S. currency.
Nonetheless, AVP reported its greatest success in the emerging markets where it now does 60% of its business. Latin America, the company's biggest market, grew 8% while North America shrank 2%.
China sales dipped as a one-time effect of the company's switch from direct sales to a more traditional distributor model in that country.
Russian sales surged 6% on a currency neutral basis, but again the unflattering exchange rate drove the final figure down 1%. And in the somewhat unhelpfully defined region extending from Western Europe through Africa into the Middle East -- a mix of stagnant developed and vibrant emerging markets -- sales soared 11%.
For people with trouble getting exposure to the emerging consumer, AVP remains a key trade. These results are solid enough when you consider that all of its competitors will suffer roughly the same currency impact.
Any chance to make this crowded trade lighten up only gets this stock ready to become a buy.