Avon Products Inc. (AVP), the global beauty company, is slated to report its first-quarter 2014 results on May 1, 2014. In the last quarter, it posted a negative earnings surprise of 17.24%. Let’s see how things are shaping up for this announcement.
Factors This Past Quarter
Avon Products reported better-than-expected fourth-quarter 2013 earnings, while earnings declined year over year. During the quarter, the company gained from favorable price/mix that helped gross profit growth, while it witnessed soft sales trends due to decline in both Beauty Products and Fashion & Home revenues.
Moreover, the company continues to face challenges with regards to growth of active representatives and units sold. The top line was also impacted by weak performances in all operating regions including Latin America, North America, the Middle East and Africa, and Asia-Pacific.
Earnings Whispers?
Our proven model does not conclusively show that Avon Products is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.
Negative Zacks ESP: ESP (Expected Surprise Prediction) for Avon Products is -5.00%. This is because the Most Accurate estimate stands at 19 cents, while the Zacks Consensus Estimate is pegged at 20 cents.
Zacks Rank #4 (Sell): Avon Products’ Zacks Rank #4 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements:
The Walt Disney Co’s (DIS) Earnings ESP stands at +1.03% and it carries a Zacks Rank #2 (Buy).
Church & Dwight Co. Inc. (CHD) has an Earnings ESP of +1.37% and a Zacks Rank #3 (Hold).
CST Brands Inc. (CST) with an Earnings ESP of +14.29% carries a Zacks Rank #3 (Hold).
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