Avon Loses Momentum - Analyst Blog


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Shares of  Avon Products Inc. ( AVP ) have lost much of its momentum, and yesterday this Zacks Rank #5 (Strong Sell) stock hit a new 52-week low of $15.20. Though the share price of this New York-based global beauty retailer has been declining since the release of disappointing third-quarter 2013 results, we believe the recent fall is due to the new challenges that multilevel-marketing companies having operations in China are facing.

The Chinese government has recently begun an investigation on Nu Skin Enterprises Inc. ( NUS ) following claims by local newspaper, People's Daily (on Jan 15) that the company was operating an illegal pyramid scheme in the country.

The news has not only affected the share price of Nu Skin but also that of several other companies with the same distribution model as investors feared that the investigation could extend to these direct selling companies as well. Other companies that have lost their market value drastically since the news include Herbalife Ltd. ( HLF ) and USANA Health Sciences Inc. ( USNA ).

After the news, Avon's shares have declined approximately 7.9%, while since the release of third-quarter results it has lost 30.6%.

Last quarter, the company reported dismal results with adjusted earnings per share and revenues decreasing 22.2% and 7%, respectively. The decline mainly resulted from the prevalent macroeconomic headwinds and weak performance at some of the company's segments, primarily North America.

Almost all the estimates were revised downward following the company's weak third-quarter results. The Zacks Consensus Estimate for fourth-quarter 2013 slipped 19.4% to 29 cents per share over the last 90 days. For 2013, the Zacks Consensus Estimate slipped 10.9% to 98 cents per share over the same time frame.

The average volume of shares traded over the last three months was approximately 4,566K. Moreover, Avon currently trades at a forward P/FCF of 30.4x, a 46.2% premium to the peer group average of 20.8x.

AVON PRODS INC (AVP): Free Stock Analysis Report

HERBALIFE LTD (HLF): Free Stock Analysis Report

NU SKIN ENTERP (NUS): Free Stock Analysis Report

USANA HLTH SCI (USNA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: AVP , HLF , NUS , USNA

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