Avon Products Inc. AVP is slated to report third-quarter 2015 results on Nov 4, 2015, before the opening bell. Last quarter, the company had delivered a positive earnings surprise of 57.1%. Let’s see how things are shaping up for this announcement.
Factors Influencing Q3 Results
After posting negative surprises in four of the last five quarters, Avon made a comeback in second-quarter 2015, reporting better-than-expected top- and bottom-line results despite continued pressure from a volatile currency backdrop. During the quarter, a significant decline in North American revenue was offset by strength in EMEA and Latin America.
Avon remains on track with its strategic endeavors to drive top-line growth, trim costs and improve working capital. The company has also made significant progress in improving its balance sheet through refinancing activities and cost reduction by slashing jobs and exiting operations in the underperforming markets. Also, in an attempt to revive its business, Avon has been boosting growth of Active Representatives.
However, the fact that the company continues to face troubles in its mature North American markets cannot be ignored. Also, its worldwide presence entails a significant negative impact on its operating results given the ongoing foreign currency translations. These factors make us slightly apprehensive about the company’s upcoming results.
Earnings Whispers
Our proven model does not conclusively show that Avon is likely to beat earnings 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:
Zacks ESP: Earnings ESP for Avon is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both are at 7 cents.
Zacks Rank: Avon carries a Zacks Rank #3 (Hold), which when combined with 0.00% ESP, makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 or 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:
Dean Foods Company DF has an Earnings ESP of +4.00% and a Zacks Rank #3.
Ralph Lauren Corp. RL has an Earnings ESP of +0.58% and a Zacks Rank #3.
Michael Kors Holdings Limited. KORS has an Earnings ESP of +3.37% and a Zacks Rank #3.
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