Why Avon Products Inc. Stock Dropped 17% in May

By Markets Fool.com

Image Source: Avon.

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What:Shares of beauty-products makerAvon Products Inc. fell 17% last month, according to data from S&P Global Market Intelligence,as the company delivered a weak earnings report, and concerns about the overall business continued.

So what:Avon said that first-quarter sales fell 16%, to $1.31 billion, as performance in Brazil and China continued to drag, and its adjusted loss per share came in at $0.07, well below the $0.02 profit that Wall Street expected. Excluding the divestiture of Liz Earle, and using constant currency, revenue increased 3%. CEO Sheri McCoy said the results were in line with expectations, and the company has been successfully executing its turnaround plan, which includes selling the North American business, and implementing a new organizational structure.

Now what:Change has been coming quickly to Avon as it sold off its North American business to Cerberus in December, and cut 7% of its workforce in March. The stock has been volatile as the company implements its turnaround strategy; but it got a vote of confidence after Jefferies initiated coverage with a buy rating. The research firm said the company had taken positive steps to alleviate cash concerns, and saw its long-term targets as "very achievable."

Though macroeconomic headwinds continue in foreign markets like Brazil, Avon is taking active steps to revamp the business. Considering the stock was above $20 less than three years ago and now trades around $4, the upside potential is considerable if the company can make meaningful steps to profitable growth.

The article Why Avon Products Inc. Stock Dropped 17% in May originally appeared on Fool.com.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.