Avon (AVP) To Report Q2 Earnings: Will The Stock Disappoint?

Avon Products Inc. (NYSE:AVP) is scheduled to report second-quarter 2016 results before the bell on Aug 2. The big question facing investors now is, whether this global beauty retailer will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, Avon missed the Zacks Consensus Estimate significantly by an average of 187.5%. Also, the company underperformed the Zacks Consensus Estimate in the preceding three quarters. Let’s see how things are shaping up for this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Avon is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Avon has an Earnings ESP of +33.33% as the Most Accurate estimate stands at 4 cents, while the Zacks Consensus Estimate is pegged at 3 cents. The company carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

AVON PRODS INC Price and EPS Surprise

AVON PRODS INC Price and EPS Surprise | AVON PRODS INC Quote

Factors Influencing this Quarter

Avon is progressing with its strategic endeavors to boost top-line growth, trim costs and improve working capital. Also, the company has been exiting operations in the underperforming markets.

However, Avon is lately battling waning top and bottom lines due to adverse currency fluctuations as well as a highly leveraged balance sheet. Nothing much has changed since the last quarter, wherein both the top and bottom lines had declined year over year, leading the company to post the third straight quarter of dismal results. Further, management expects currency woes to linger throughout 2016 and affect results. Moreover, estimates have been going down ahead of the company’s second-quarter earnings release.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Big Lots Inc. (NYSE:BIG) has an Earnings ESP of +4.35% and a Zacks Rank #2 (Buy).

Nordstrom Inc. (NYSE:JWN) has an Earnings ESP of +1.82% and a Zacks Rank #2.

L Brands, Inc. (NYSE:LB) has an Earnings ESP of +8.93% and a Zacks Rank #3 (Hold).