We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Avon (AVP) Stock Down on Q4 Earnings and Revenues Miss
Read MoreHide Full Article
Avon Products Inc. reported dismal fourth-quarter 2018 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Also, both the metrics declined year over year. We note that Active and Ending Representatives fell 6% and 8%, respectively, which mainly impacted the top line. A clear reflection of this Zacks Rank #4 (Sell) company’s dismal performance is visible in its share price decline of 7.4% during the pre-market trading.
The company’s earnings came in at 7 cents per share, which fell short of the Zacks Consensus Estimate by a penny and also declined 41.7% year over year. On a GAAP basis, the company incurred a loss of 19 cents per share compared to earnings of 17 cents registered in the year-ago quarter.
Avon Products, Inc. Price, Consensus and EPS Surprise
Total revenues fell 11% year over year to $1,401.7 million. Net sales declined 14% to $1,323 million. The Zacks Consensus Estimate for fourth-quarter revenues stands at $1,443 million.
Further, total Reportable Segment revenues (in reported currency) also declined 10% to $1,395.3 million. On a like-for-like basis, which excludes the impact of the adoption of the new revenue standard in first-quarter 2018, total Reportable Segment revenues (in constant currency) fell 1% in the quarter. While average orders improved 7% and price/mix rose 9%, total units sold dropped 8%.
Adjusted gross margin came in at 56.1% in the quarter. Further, on a like-for-like basis, gross margin contracted 140 basis points (bps) to 59.7%, mainly due to adverse impact from foreign exchange.
Meanwhile, adjusted operating margin was 5.5%. On a like-for-like basis, operating margin fell 420 bps to 5.7% on gross margin contraction as well as investments in Representative, sales leader and field expenses. Also, increased advertising and transportation costs along with sales deleverage and adverse foreign currency dented margins. These were somewhat mitigated with lower bad debt, mainly in Brazil.
Segmental Performance
Avon’s Europe, Middle East & Africa segment generated revenues of $581.8 million, which fell 9% year over year. On a currency-neutral basis, revenues were down 2%. Results included an 8% decline in Active Representatives and a 9% fall in units sold. Also, Ending Representatives fell 10%. These were offset by a 7% gain in price/mix and 6% growth in average order.
South Latin America’s revenues fell 15% to $488.3 million, while the same rose 6% on a constant-dollar basis. In the reported quarter, Active and Ending Representatives declined a respective 7% and 9%, while units sold fell 10%. However, the segment witnessed a 13% increase in average order and a 16% rise in price/mix.
North Latin America’s revenues dipped 3% year over year at $199.4 million but improved 3% in constant dollars. While Active Representatives remained flat year over year, Ending Representatives declined 7%. Further, the segment reported a 2% increase in average orders and 1% growth in both units sold and price/mix.
Asia Pacific’s revenues remained flat at $125.8 million, while it improved 4% in constant dollars, mainly owing to a 6% increase in average orders and a 4% rise in units sold. This was partly negated by a 2% fall in Active Representatives and a 3% decline in Ending Representatives. Meanwhile, price/mix remained unchanged.
Financial Details
Avon ended the year with cash and cash equivalents of $532.7 million, long-term debt of $1,581.6 million and total shareholders’ deficit of $904.5 million (excluding non-controlling interests).
Other Developments
Avon has successfully completed its restructuring plans pertaining to the cost savings program that was initiated in 2016. Notably, the company surpassed the targeted $350 million run-rate savings in 2018. Additionally, it generated $40 million of cost savings from its ‘Open Up Avon’ strategy.
Furthermore, Avon has been taking strategic measures to create a simpler and more agile company. Evidently, management has announced the sale of China manufacturing facility as well as manufacturing and supply agreements with LG. Moreover, the company plans to improve operating efficiency, slash inventory levels and reduce portfolio complexity. These restructuring efforts include a 25% decrease in Stock Keeping Units (SKU), a 15% reduction in inventory levels and 10% job cuts.
The company also recorded one-time inventory obsolescence expenses of nearly $88 million in the reported quarter and plans to incur a restructuring charge of roughly $100 million in 2019. In the fourth quarter, it repaid an additional $50 million of debt, following which its total debt reduced to about $300 million at the end of the year. The company notified that it has entered into a new three-year, €200 million senior secured credit facility.
You May Count on These Better-Ranked Consumer Staples Stocks
Nu Skin Enterprises, Inc. (NUS - Free Report) is also a Zacks Rank #1 stock. The company has an expected long-term earnings growth rate of 11.2%.
The Simply Good Foods Company (SMPL - Free Report) carries a Zacks Rank #2 (Buy) and has delivered average positive earnings surprise of 13.3% in the trailing four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Avon (AVP) Stock Down on Q4 Earnings and Revenues Miss
Avon Products Inc. reported dismal fourth-quarter 2018 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Also, both the metrics declined year over year. We note that Active and Ending Representatives fell 6% and 8%, respectively, which mainly impacted the top line. A clear reflection of this Zacks Rank #4 (Sell) company’s dismal performance is visible in its share price decline of 7.4% during the pre-market trading.
The company’s earnings came in at 7 cents per share, which fell short of the Zacks Consensus Estimate by a penny and also declined 41.7% year over year. On a GAAP basis, the company incurred a loss of 19 cents per share compared to earnings of 17 cents registered in the year-ago quarter.
Avon Products, Inc. Price, Consensus and EPS Surprise
Avon Products, Inc. Price, Consensus and EPS Surprise | Avon Products, Inc. Quote
Q4 in Detail
Total revenues fell 11% year over year to $1,401.7 million. Net sales declined 14% to $1,323 million. The Zacks Consensus Estimate for fourth-quarter revenues stands at $1,443 million.
Further, total Reportable Segment revenues (in reported currency) also declined 10% to $1,395.3 million. On a like-for-like basis, which excludes the impact of the adoption of the new revenue standard in first-quarter 2018, total Reportable Segment revenues (in constant currency) fell 1% in the quarter. While average orders improved 7% and price/mix rose 9%, total units sold dropped 8%.
Adjusted gross margin came in at 56.1% in the quarter. Further, on a like-for-like basis, gross margin contracted 140 basis points (bps) to 59.7%, mainly due to adverse impact from foreign exchange.
Meanwhile, adjusted operating margin was 5.5%. On a like-for-like basis, operating margin fell 420 bps to 5.7% on gross margin contraction as well as investments in Representative, sales leader and field expenses. Also, increased advertising and transportation costs along with sales deleverage and adverse foreign currency dented margins. These were somewhat mitigated with lower bad debt, mainly in Brazil.
Segmental Performance
Avon’s Europe, Middle East & Africa segment generated revenues of $581.8 million, which fell 9% year over year. On a currency-neutral basis, revenues were down 2%. Results included an 8% decline in Active Representatives and a 9% fall in units sold. Also, Ending Representatives fell 10%. These were offset by a 7% gain in price/mix and 6% growth in average order.
South Latin America’s revenues fell 15% to $488.3 million, while the same rose 6% on a constant-dollar basis. In the reported quarter, Active and Ending Representatives declined a respective 7% and 9%, while units sold fell 10%. However, the segment witnessed a 13% increase in average order and a 16% rise in price/mix.
North Latin America’s revenues dipped 3% year over year at $199.4 million but improved 3% in constant dollars. While Active Representatives remained flat year over year, Ending Representatives declined 7%. Further, the segment reported a 2% increase in average orders and 1% growth in both units sold and price/mix.
Asia Pacific’s revenues remained flat at $125.8 million, while it improved 4% in constant dollars, mainly owing to a 6% increase in average orders and a 4% rise in units sold. This was partly negated by a 2% fall in Active Representatives and a 3% decline in Ending Representatives. Meanwhile, price/mix remained unchanged.
Financial Details
Avon ended the year with cash and cash equivalents of $532.7 million, long-term debt of $1,581.6 million and total shareholders’ deficit of $904.5 million (excluding non-controlling interests).
Other Developments
Avon has successfully completed its restructuring plans pertaining to the cost savings program that was initiated in 2016. Notably, the company surpassed the targeted $350 million run-rate savings in 2018. Additionally, it generated $40 million of cost savings from its ‘Open Up Avon’ strategy.
Furthermore, Avon has been taking strategic measures to create a simpler and more agile company. Evidently, management has announced the sale of China manufacturing facility as well as manufacturing and supply agreements with LG. Moreover, the company plans to improve operating efficiency, slash inventory levels and reduce portfolio complexity. These restructuring efforts include a 25% decrease in Stock Keeping Units (SKU), a 15% reduction in inventory levels and 10% job cuts.
The company also recorded one-time inventory obsolescence expenses of nearly $88 million in the reported quarter and plans to incur a restructuring charge of roughly $100 million in 2019. In the fourth quarter, it repaid an additional $50 million of debt, following which its total debt reduced to about $300 million at the end of the year. The company notified that it has entered into a new three-year, €200 million senior secured credit facility.
You May Count on These Better-Ranked Consumer Staples Stocks
The Estee Lauder Companies Inc. (EL - Free Report) has an impressive long-term earnings growth rate of 12.4% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nu Skin Enterprises, Inc. (NUS - Free Report) is also a Zacks Rank #1 stock. The company has an expected long-term earnings growth rate of 11.2%.
The Simply Good Foods Company (SMPL - Free Report) carries a Zacks Rank #2 (Buy) and has delivered average positive earnings surprise of 13.3% in the trailing four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>