Avon Products Inc. Earnings Cheat Sheet: Increased Costs Strains Margins as Profit Drops

S&P 500 (NYSE:SPY) component Avon Products Inc. (NYSE:AVP) reported its results for the third quarter. Avon Products is a global manufacturer and marketer of beauty, fashion, and home products.

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Avon Products Earnings Cheat Sheet for the Third Quarter

Results: Net income for the personal products company fell slightly to $164.2 million (38 cents per share) vs. $166.7 million (38 cents per share) a year earlier. This is a decline of 1.5% from the year earlier quarter.

Revenue: Rose 3.9% to $2.76 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: AVP fell short of the mean analyst estimate of 46 cents per share. It fell short of the average revenue estimate of $2.83 billion.

Key Stats:

Gross margin shrank 0.5 percentage point to 63.9%. The contraction appeared to be driven by increased costs, which rose 5.5% from the year earlier quarter while revenue rose 3.9%.

Revenue has now gone up for three straight quarters. In the second quarter, revenue rose 6.6% to $2.86 billion while the figure rose 5.6% in the first quarter from the year earlier.

Last quarter’s profit decrease breaks a streak of two consecutive quarters of year-over-year profit increases. Net income rose 23% in the second quarter and more than threefold in the first quarter.

The company has now fallen short of estimates in the last two quarters. In the second quarter, it missed expectations by one cent with net income of 49 cents versus a mean estimate of net income of 50 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 73 cents per share to 69 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $2.01 per share, the average estimate for the fiscal year has fallen from $2.08 ninety days ago.

Competitors to Watch: The Estee Lauder Companies Inc. (NYSE:EL), Revlon, Inc. (NYSE:REV), Alberto-Culver Company (NYSE:ACV), Nu Skin Enterprises, Inc. (NYSE:NUS), Inter Parfums, Inc. (NASDAQ:IPAR), Colgate-Palmolive Company (NYSE:CL), USANA Health Sciences, Inc. (NASDAQ:USNA), Elizabeth Arden, Inc. (NASDAQ:RDEN), Herbalife Ltd. (NYSE:HLF), and Parlux Fragrances, Inc. (NASDAQ:PARL).

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(Source: Xignite Financials)