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Mixed News at Avon

The company's second-quarter earnings beat estimates, but guidance looks soft.

Second-quarter earnings surged at

Avon Products

(AVP) - Get Avon Products, Inc. Report

thanks to strong international results, but the company boosted full-year guidance to a level that falls short of analysts' estimates.

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The New York company earned $232.3 million, or 49 cents a share, in the three months to June 30, compared with earnings of $171.5 million, or 36 cents a share, last year. Sales rose 13% to $1.84 billion.

Avon's most recent quarter included a number of one-time items, several of which were anticipated by analysts in their earnings estimates. The exception appeared to be a gain of 1 cent a share related to the early receipt of a tax settlement. According to Thomson First Call, analysts were forecasting earnings of 46 cents a share in the 2004 quarter on revenue of $1.82 billion.

The company now expects to earn $1.72 a share in full-year 2004, up from its old guidance of $1.70 a share but below the Thomson First Call consensus of $1.73 a share.

The company attributed the improved second-quarter top line to a 17% increase in sales of beauty products, where all its major categories saw double-digit gains. Avon's operating margin rose 40 basis points from a year ago to 17.4% in the second quarter, including a $6.2 million payout to settle a lawsuit. Gross margin rose 170 basis points to 64.1%, reflecting cost savings across its regions.

"Our international regions performed above expectations, with Europe, Latin America and Asia Pacific all generating double-digit gains in sales, operating profit, units and active representatives," Avon said. "While overall U.S. sales were 3%, we're very encouraged by the continuing strength in beauty sales and solid growth in active representatives, our most critical strategic indicators."