The analyst firm lowered its 2015 EPS estimates for the beauty product company to 75 cents a share from 83 cents a share. Credit Suisse analysts also lowered their 2016 EPS estimates for the company to 82 cents a share from 89 cents a share.
"The combination of AVP's appointment of James Scully as CFO (previously COO of a TPG-owned company) and recent widespread press reports about discussions AVP may be having with TPG should start to put a floor under the share price despite substantial downward pressure on earnings," Credit Suisse analysts wrote. "While we are not convinced that AVP is an obvious LBO target, management may find it easier to restructure the company as a private entity."
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Separately, TheStreet Ratings team rates AVON PRODUCTS as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate AVON PRODUCTS (AVP) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 2.89 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AVP has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Personal Products industry and the overall market, AVON PRODUCTS's return on equity significantly trails that of both the industry average and the S&P 500.
- AVP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 46.48%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- AVP, with its decline in revenue, underperformed when compared the industry average of 5.7%. Since the same quarter one year prior, revenues slightly dropped by 8.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for AVON PRODUCTS is rather high; currently it is at 64.23%. Regardless of AVP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.27% trails the industry average.
- You can view the full analysis from the report here: AVP Ratings Report