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Avon Upgraded to Strong Buy

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On Jun 4, Zacks Investment Research upgraded Avon Products Inc. (AVP - Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Avon has been witnessing rising earnings estimates on the back of better-than-expected bottom-line results in the first quarter of 2013. For the second consecutive quarter, this global beauty company’s earnings per share beat the Zacks Consensus Estimate after reporting lower-than-expected earnings in the past 6 quarters. Moreover, we believe that Avon’s strategic move of improving the health of its balance sheet through refinancing activities helped in the upward movement of estimates.

Avon posted first-quarter adjusted earnings of 26 cents per share on Apr 30, easily beating the Zacks Consensus Estimate of 14 cents, and increasing twofold from the comparable year-ago quarter number of 10 cents.

Of late, Avon has been encountering challenges on various fronts including declining top and bottom lines and highly-leveraged balance sheet. In Nov 2012, Avon outlined some strategic measures focused on accelerating the top-line growth, trimming down costs and improving working capital.

As part of its strategy, Avon decreased its quarterly dividend by 6 cents to 23 cents per share and now aims to slash costs by $400 million through 2016. We believe that the Avon’s turnaround strategies are paying off, as is evident from its improved operating results in the last 2 quarters.

The Zacks Consensus Estimate for 2013 increased 11.7% to $1.15 per share as most of the estimates were revised upward over the last 60 days. Moreover, for 2014, the estimates were revised upward over the same time-frame, thereby lifting the Zacks Consensus Estimate by 6.9% to $1.40 per share.

Other Stocks to Consider

Apart from Avon, Nu Skin Enterprises Inc. (NUS - Free Report) with a Zacks Rank #1 (Strong Buy) is performing well in the soaps-cosmetics industry. Other stocks in the same sector that warrants a look include International Flavors & Fragrances Inc. (IFF - Free Report) and Inter Parfums Inc. (IPAR - Free Report) , both of which carry a Zacks Rank #2 (Buy).

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