With growing demand for its products and improved cost
management, Avon seems to be in a position to deliver decent
Further, with a solid outlook for the industry, this Zacks Rank
#1 (Strong Buy) beauty products company looks quite attractive as
About the Company
) is a leading global beauty company, with nearly $11 billion in
annual revenue. The company is the world's largest direct seller
with more than 6 million active independent sales
Avon products are available in over 100 countries, and the
products include color cosmetics, skincare, fragrance, fashion and
home products, under brand names like Avon Color, ANEW,
Skin-So-Soft and Advance Techniques.
Excellent Results and Improving Fundamentals
Avon posted first-quarter adjusted earnings of $0.26 per share
on April 30, easily crushing the Zacks Consensus Estimate of $0.14
per share, and increasing more than twice from the $0.10 per share
in the prior-year quarter.
Adjusted gross margin was 62.5%, 160 basis points higher than
the prior-year quarter, primarily due to lower freight costs and
lower material costs.
After underperforming for many years, the company finally took a
number of steps last year including upgrading senior talent,
implementing stabilization plans for key markets, prioritizing
product categories, reducing cost base and improving capital
These strategies finally seem to be paying off as this was the
second consecutive earnings beat for the company after reporting
six quarters of lower-than-expected results.
Positive Earnings Estimates Revisions
As a result of improving outlook for the company, analysts have
been revising their estimates for the June 2013 quarter and the
fiscal year 2013. Zacks consensus estimates for the second quarter
and the fiscal year 2013 now stand at $0.25 and $1.15 per
Solid Industry Outlook
Per Avon, the global beauty Market is $400 billion currently and
is projected to grow at 7% rate through 2017, mainly driven by
surging demand in developing countries. Further, consumer shopping
behavior continues to change but word-of-mouth remains the most
trusted source of information, benfitting direct sellers like
With a Zacks Industry Rank of 17 out of 265, Cosmetics industry
is expected to outperform significantly in the near-to mid- term,
The Bottom Line
AVP is a Zacks Rank#1 (Strong Buy) stock. It also has a
longer-term Zacks recommendation of "Outperform". Additionally, a
Zacks Industry rank of 17 out of 265 indicates very strong
likelihood of continued strength in the short to medium term,
compared with other industries.
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AVON PRODS INC (AVP): Free Stock Analysis
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