Avon Products Inc. (AVP), leading manufacturer and marketer of beauty and related products, is slated to report its fourth-quarter 2014 results on Feb 12. In the last quarter, the company delivered a positive earnings surprise of 43.8%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Loss of active representatives, declining volumes, unfavorable exchange rates and reducing margins in mature markets has dragged down Avon Products’ performance over the course of time. This has led to the company to report distressed sales results in the past few quarters.
Over the last four years, Avon has witnessed a declining revenue trend in North America, especially in the U.S., mainly due to a decrease in active representatives, partly offset by large average order.
Further, weakness in the emerging markets as well as regulatory and cash flow issues risking dividend are the other negatives. Although the company is striving to revive its business through strategic initiatives that were formulated in Nov 2012, we believe that it will take time for these initiatives to turn around its operating performance.
Earnings Whispers?
Our proven model shows that Avon Products is likely to miss earnings estimates this quarter. This is because the stock has a negative Earnings ESP and a Zacks Rank #4 (Sell).
Zacks ESP: Avon Products’ Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -4.00%. This is because the Most Accurate Estimate of 24 cents is lower than the Zacks Consensus Estimate of 25 cents.
Zacks Rank: Avon Products’ Zacks Rank #4 when combined with a negative ESP makes surprise prediction unlikely. We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Kroger Co. (KR) has an Earnings ESP of +4.49% and a Zacks Rank #2 (Buy).
Dollar Tree Inc. (DLTR) has an Earnings ESP of +0.88% and a Zacks Rank #3 (Hold).
Macy’s Inc. (M) has an Earnings ESP of +0.41% and a Zacks Rank #3.
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