Avon Products, Inc. is slated to release first-quarter 2018 results on May 3, before the market opens. The question lingering in investors’ minds is whether this leading beauty and cosmetics retailer will be able to deliver earnings beat in the quarter to be reported.
Though the company reported positive earnings surprise in the last quarter, it exhibited a dismal earnings trend in the preceding five quarters. Consequently, it has a negative earnings surprise of 35.7% in the trailing four quarters. Further, the company lagged sales estimates in five of the last six quarters. Let’s find out how things are shaping up for this announcement.
Avon Products, Inc. Price, Consensus and EPS Surprise
Which Way are Estimates Treading?
In order to get a clear picture of what analysts are thinking about the company prior to the earnings release, let’s have a look at the earnings estimate revisions. The Zacks Consensus Estimate for the quarter under review is pegged at a loss of 2 cents per share and has witnessed negative revisions in the last 30 days. However, this compares favorably with a loss of 7 cents per share reported in the year-ago quarter. Analysts polled by Zacks expect revenues of $1.4 billion, up 2.4% from the prior-year quarter.
Factors at Play
Avon’s troubles are not new though. Dismal earnings and sales trends and fall in Active Representatives are major concerns for Avon for quite some time. We note that Active Representatives were consistently recording a decline in the preceding quarters. Apparently, the company’s top line in the fourth quarter of 2017 was mainly hurt by a decline in both Active Representatives and Ending Representatives across all segments, except EMEA. Active Representatives declined higher-than-anticipated, mainly owing to fall in Brazil, which also hurt volumes significantly.
Moving ahead, Avon’s top line is likely to remain under pressure due to a tough macro and competitive environment, mainly in its largest markets.
However, Avon is on track with its Transformation Plan, which delivered above its cost-saving plan for 2017. Notably, the company surpassed the cost-saving target of $230 million in 2017, realizing cost savings of more than $250 million. Further, it is on track to reach three-year cost savings target of $350 million.
Going forward, management is likely to focus on business foundations and improve overall performance to attain the savings target. Furthermore, the company anticipates achieving the long-term target of delivering mid-single-digit constant-dollar revenue growth and low double-digit operating margin. Management expects 2018 to be a year of executing significant operational improvements, despite continued competitive pressures.
Despite all odds, the company’s shares have improved 6.9% in the last three months, outperforming the industry’s growth of 4.2%. This indicates that there still remains hope for revival.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Avon 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Avon currently has a Zacks Rank #3 and an Earnings ESP of -66.67%. The combination of Avon’s Zacks Rank and negative Earnings ESP makes surprise prediction difficult.
Stocks With Favorable Combination
Here are some companies that you may want to consider as our model shows that these, too, have the right combination of elements to post an earnings beat:
Ralph Lauren Corporation (RL - Free Report) has an Earnings ESP of +2.92% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Estee Lauder Companies Inc. (EL - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #3.
Under Armour, Inc. (UAA - Free Report) has an Earnings ESP of +11.31% and a Zacks Rank #3.
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Avon Products, Inc. is slated to release first-quarter 2018 results on May 3, before the market opens. The question lingering in investors’ minds is whether this leading beauty and cosmetics retailer will be able to deliver earnings beat in the quarter to be reported.
Though the company reported positive earnings surprise in the last quarter, it exhibited a dismal earnings trend in the preceding five quarters. Consequently, it has a negative earnings surprise of 35.7% in the trailing four quarters. Further, the company lagged sales estimates in five of the last six quarters. Let’s find out how things are shaping up for this announcement.
Avon Products, Inc. Price, Consensus and EPS Surprise
Which Way are Estimates Treading?
In order to get a clear picture of what analysts are thinking about the company prior to the earnings release, let’s have a look at the earnings estimate revisions. The Zacks Consensus Estimate for the quarter under review is pegged at a loss of 2 cents per share and has witnessed negative revisions in the last 30 days. However, this compares favorably with a loss of 7 cents per share reported in the year-ago quarter. Analysts polled by Zacks expect revenues of $1.4 billion, up 2.4% from the prior-year quarter.
Factors at Play
Avon’s troubles are not new though. Dismal earnings and sales trends and fall in Active Representatives are major concerns for Avon for quite some time. We note that Active Representatives were consistently recording a decline in the preceding quarters. Apparently, the company’s top line in the fourth quarter of 2017 was mainly hurt by a decline in both Active Representatives and Ending Representatives across all segments, except EMEA. Active Representatives declined higher-than-anticipated, mainly owing to fall in Brazil, which also hurt volumes significantly.
Moving ahead, Avon’s top line is likely to remain under pressure due to a tough macro and competitive environment, mainly in its largest markets.
However, Avon is on track with its Transformation Plan, which delivered above its cost-saving plan for 2017. Notably, the company surpassed the cost-saving target of $230 million in 2017, realizing cost savings of more than $250 million. Further, it is on track to reach three-year cost savings target of $350 million.
Going forward, management is likely to focus on business foundations and improve overall performance to attain the savings target. Furthermore, the company anticipates achieving the long-term target of delivering mid-single-digit constant-dollar revenue growth and low double-digit operating margin. Management expects 2018 to be a year of executing significant operational improvements, despite continued competitive pressures.
Despite all odds, the company’s shares have improved 6.9% in the last three months, outperforming the industry’s growth of 4.2%. This indicates that there still remains hope for revival.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Avon 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Avon currently has a Zacks Rank #3 and an Earnings ESP of -66.67%. The combination of Avon’s Zacks Rank and negative Earnings ESP makes surprise prediction difficult.
Stocks With Favorable Combination
Here are some companies that you may want to consider as our model shows that these, too, have the right combination of elements to post an earnings beat:
Ralph Lauren Corporation (RL - Free Report) has an Earnings ESP of +2.92% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Estee Lauder Companies Inc. (EL - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #3.
Under Armour, Inc. (UAA - Free Report) has an Earnings ESP of +11.31% and a Zacks Rank #3.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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