Why Avon Might Be a Pretty Pick

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Avon Products (NYSE: AVP  ) jumped nearly 4% in early Tuesday trading after Wells Fargo upgraded the beauty-products company from market perform to outperform.

So what: Along with the upgrade, analyst Chris Ferrara boosted his price target range to $25-$26 (from $21-$23), representing about 28% worth of upside from the midpoint of the estimate to yesterday's close. Avon shares have slumped in recent months on continued concerns over weakening fundamentals, but Ferrara thinks that management's turnaround initiatives are only starting to gain traction and should soon start surpassing Wall Street's low expectations.

Now what: Ferrara expects Avon to earn $1.13 per share this year and $1.37 per share in 2014, noticeably higher than the consensus estimate of $1.10 and $1.33, respectively. "While there is still a long way to go, real progress has been made, and we expect EBIT margin expansion to outpace market expectations (and peers) over the next three years, driving higher-than-expected earnings results," wrote Ferrara. Of course, when you couple Avon's market-matching forward P/E of 15 with its still-hefty debt load, I'd wait for an even wider margin of safety before betting on that turnaround talk. 

A more reliable way to build wealth
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2673962, ~/Articles/ArticleHandler.aspx, 9/21/2014 2:37:19 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement