"Beauty is as beauty does, the saying goes, and Avon Products Inc. (NYSE: AVP) has delivered a beautiful earnings report," says Jack Adamo in his industry-leading Insiders Plus. Here's his latest.
"Despite a 14% increase in advertising (or perhaps, because of it) the company delivered EPS up 26%. In North America, the only underperforming region, revenues continued their slow downward slide. But active representatives increased for the first time in ages, which may brighten the future on the company's home turf.
"International sales continued to soar. Latin America was 19% higher in local currencies, and 32% higher after translation into the American Peso, also known as the U.S. Dollar. In Central & Eastern Europe, first-quarter revenue rose 17% (6% in local currency). Revenue in China grew 29% (19% local). Only Japan dragged things down a bit with its 2% gain.
"Avon took $26 million in restructuring charges this quarter, about the same as Q1 last year. The ongoing program is expected to be completed by 2012 at a total cost of $550 million, and will save the company in the neighborhood of $430 million annually. Savings this year alone should amount to $270 million.
"Avon is up 53% for us in two-and-half years. The stock is starting to again garner the kind of P/E it had when it was known as one of America's premier growth companies. At 18-times forward earnings and growth expected in the 18% range, it's still cheap for a growth stock of this caliber.
"Meanwhile, I think the market is likely to pull back in the next couple of months. Make sure you get this beauty when it's on sale again. Buy Avon Products on pullbacks below $37."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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