Avon Products Inc. AVP has been gradually losing momentum due to continuous loss of active representatives, declining volumes, unfavorable foreign currency translations and reduced margins in mature markets like North America. Shares of this beauty products company have plunged roughly 54.7% year-to-date.
The company’s performance faltered in third quarter 2015 as both top and bottom lines fell year over year. Avon’s dismal performance was mainly due to continued pressure from a volatile currency backdrop and a tough macroeconomic environment.
Further, management narrowed its 2015 guidance for sales and margins to account for the anticipated increase in negative currency translation effect and adverse impact from additional VAT taxes in Brazil.
Moreover, over the last five years, Avon has been witnessing a declining revenue trend in North America, especially in the U.S., mainly due to a decrease in active representatives. Management is concerned about this rapid decline. Hence, this Zacks Rank #5 (Strong Sell) company has been constantly striving to stabilize the situation.
We believe that all the aforementioned factors led to downward revisions in Avon’s earnings estimates as analysts have become less constructive on the stock’s future performance. The Zacks Consensus Estimate slumped 67.6% to 11 cents per share for 2015 and 28.9% to 32 cents per share for 2016 over the past 60 days.
Stocks that Warrant a Look
A better-ranked stock in the same industry is The Estée Lauder Companies Inc. EL with a Zacks Rank #2 (Buy). Some well-placed stocks in the broader consumer staples space include Archer Daniels Midland Company ADM and Cal-Maine Foods Inc. CALM, both sporting a Zacks Rank #1 (Strong Buy).
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