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Why Shares of Avon Products, Inc. Gained 32.1% in February

By Keith Noonan – Updated Apr 12, 2019 at 5:12PM

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Avon stock is down 35% over the last three years, but it trades up roughly 80% in 2019.

What happened

Avon Products (AVP) stock gained 32.1%% in February, according to data from S&P Global Market Intelligence . The stock posted gains early in the month and then continued to climb following the company's fourth-quarter earnings release on Feb. 14.

AVP Chart

AVP data by YCharts

February's big gains followed up the 54% jump that the stock saw in January pushed Avon stock to a fresh 52-week high. The company has languished in recent years amid mounting costs and declining revenue, but a restructuring initiative to get the business back to regular profitability has investors seeing bright spots in its earnings results and has sent shares soaring in 2019. 

Check out the latest earnings call transcript for Avon.

A woman applying lipstick in a handheld mirror.

Image source: Getty Images.

So what

The company posted an adjusted loss per earnings of $0.08, down 33% year over year, on sales of $1.32 billion, up 2% overall but down 1.4% organically, in its December quarter. Sales and earnings performance for the period fell short of the average analyst targets, and Avon's stock actually fell shortly after the earnings release, but it bounced back to post gains not long after.

February saw the company complete the sale of its Chinese manufacturing operation -- a step in reducing its international business and reducing its employee count. The company also published a press release on Feb. 25 outlining the launch of a content studio to support the growth of its digital business.

Now what

Avon's fourth-quarter performance didn't have much to cheer about by usual standards, but slowing revenue declines and aggressive cost-savings initiatives present a feasible path to improved earnings performance. It's possible that additional developments and confidence in the company's turnaround effort will continue to spur rapid stock growth, but investors may want to approach with caution with shares trading at roughly 25 times this year's expected earnings and big questions remaining about how the business can re-energize sales.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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