Avon Products Profits and Margins to Expand, Shares to Remain Volatile

Bill Schmitz Jr of Deutsche Bank maintains his “hold” rating on Avon Products Inc (NYSE: AVN). The target price for AVN has been raised from $35 to $38.

The macro economic headwinds have abated and there is a reversal in the compression in forex margins. As a result, AVN’s gross and operating margins are likely to expand in the near future driven by organic sales and restructuring leverage, Deutsche Bank said. Although AVN faces substantial challenges in China and North America, Deutsche Bank expects the company to post at least 5% organic sales growth in the near term, even if it fails to gain substantial market share.

According to Deutsche Bank, Avon Products' profits and EPS are likely to benefit going forward by restructuring savings and volume leverage. Deutsche Bank expects AVN’s performance to continue to recover, especially if the US dollar remains weak. AVN’s share price may remain volatile, Deutsche Bank adds.