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Ahead Of The Bell: BMO Analyst Upgrades Avon

The Associated Press

NEW YORK (AP) — Shares of cosmetics company Avon Products Inc. were upgraded to "Market Perform" from "Underperform" by a BMO Capital Markets analyst as the company signed up 1 million new representatives in the first quarter.

Analyst Connie Maneaty also said the company should offer more details of its $300 million to $400 million restructuring program when it reports second-quarter results. The restructuring is expected to cut costs by $200 million a year by 2013.

Still, Maneaty warns that sales are likely to worsen.

"Avon expects organic sales to slow owing to the severe recession," the analyst wrote in a research note to investors. She dropped her estimate of 2009 operating profit by 6 cents to $1.45 and assumes a 6.5 percent sales decline.

Analysts polled by Thomson Reuters expect $1.57 per share in 2009.

In the second, third and fourth quarters, Maneaty expects profit of 31 cents, 33 cents and 57 cents, respectively.

The analyst lowered the second- and third-quarter estimates, in part because higher prices will not be enough to close a deficit from unfavorable currency comparisons. Profits of companies that do business overseas are hurt by a stronger dollar as revenue collected in local currencies are translated back into dollars.

A consensus forecast from analysts is that second-quarter profit will be 35 cents per share.

Avon shares closed Monday at $23.67. They have traded in a 52-week range of $14.40 to $45.34.