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Avon (AVP) Slashed to Rank #5: What's Wrong with the Stock?
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On Jul 6, 2016, Zacks Investment Research downgraded beauty products company, Avon Products Inc. , to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Avon has been in troubled waters with its stock price on the downhill for quite sometime now. Evidently, the stock has lost nearly 8% year to date.
Avon has been grappling with continuous loss of Active representatives, which declined in four of the past five quarters, leading to waning top-line results. Moreover, significant presence in the international markets exposes the company to the risk of unfavorable foreign currency translations, which have been weighing on its quarterly performance for a while now.
This is evident from Avon’s dismal earnings surprise history. The company has lagged our estimates in three out of the trailing four quarters, by a miserable negative surprise of 187.5%. In fact, in first-quarter 2016, the company posted a loss of 7 cents per share, which marked a significant decline from earnings of 3 cents per share in the year-ago quarter.
Simultaneously, the company’s top line plunged year over year. Results were mainly marred by adverse currency fluctuations, apart from being affected by Liz Earle’s sale and unfavorable taxes in Brazil. Well this is not all, as this New York-based company expects results in 2016 to continue being hurt by these currency headwinds.
We believe that all these factors, along with a highly leveraged balance sheet, pose concerns about Avon’s future, thereby leading the Zacks Consensus Estimate to trend downward as analysts have turned less constructive on its ongoing performance. Notably, the Zacks Consensus Estimate for 2016 and the second quarter has plunged 54.2% to 11 cents and 40% to 3 cents, respectively, over the past 90 days.
While Avon is not sparing any effort to counter the dismal trends and bring about a turnaround in its business, we must remember the saying – “Rome was not built in a day.” Hence, despite the company’s makeover efforts, we prefer to remain on the sidelines as we believe that its problems cannot be solved overnight.
Stocks to Consider
Better-ranked stocks in the same industry include Elizabeth Arden, Inc. , with a Zacks Rank #1 (Strong Buy), The Estée Lauder Companies Inc. (EL - Free Report) and Nu Skin Enterprises Inc. (NUS - Free Report) , each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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Avon (AVP) Slashed to Rank #5: What's Wrong with the Stock?
On Jul 6, 2016, Zacks Investment Research downgraded beauty products company, Avon Products Inc. , to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Avon has been in troubled waters with its stock price on the downhill for quite sometime now. Evidently, the stock has lost nearly 8% year to date.
Avon has been grappling with continuous loss of Active representatives, which declined in four of the past five quarters, leading to waning top-line results. Moreover, significant presence in the international markets exposes the company to the risk of unfavorable foreign currency translations, which have been weighing on its quarterly performance for a while now.
This is evident from Avon’s dismal earnings surprise history. The company has lagged our estimates in three out of the trailing four quarters, by a miserable negative surprise of 187.5%. In fact, in first-quarter 2016, the company posted a loss of 7 cents per share, which marked a significant decline from earnings of 3 cents per share in the year-ago quarter.
Simultaneously, the company’s top line plunged year over year. Results were mainly marred by adverse currency fluctuations, apart from being affected by Liz Earle’s sale and unfavorable taxes in Brazil. Well this is not all, as this New York-based company expects results in 2016 to continue being hurt by these currency headwinds.
We believe that all these factors, along with a highly leveraged balance sheet, pose concerns about Avon’s future, thereby leading the Zacks Consensus Estimate to trend downward as analysts have turned less constructive on its ongoing performance. Notably, the Zacks Consensus Estimate for 2016 and the second quarter has plunged 54.2% to 11 cents and 40% to 3 cents, respectively, over the past 90 days.
AVON PRODS INC Price and Consensus
AVON PRODS INC Price and Consensus | AVON PRODS INC Quote
While Avon is not sparing any effort to counter the dismal trends and bring about a turnaround in its business, we must remember the saying – “Rome was not built in a day.” Hence, despite the company’s makeover efforts, we prefer to remain on the sidelines as we believe that its problems cannot be solved overnight.
Stocks to Consider
Better-ranked stocks in the same industry include Elizabeth Arden, Inc. , with a Zacks Rank #1 (Strong Buy), The Estée Lauder Companies Inc. (EL - Free Report) and Nu Skin Enterprises Inc. (NUS - Free Report) , each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>