Update: Goldman Sachs Raising Estimates, Price Target On Avon Products (AVP)

Goldman Sachs is raising its estimates on shares of Avon Products AVP following earnings. It has a Sell rating and a $29 price target on shares, up from $28. In a note to investors, Goldman writes, "1Q11 EPS of $0.37 was $0.06 ahead of our $0.31 estimate, with upside coming from sales and gross margin. We are raising our 2011/2012/2013 EPS estimates to $2.11/$2.39/$2.69 from $1.98/$2.25/$2.59 to reflect 1Q upside and USD weakness. Goldman goes on to say, "We view 1Q results as broadly positive versus expectations: Avon's organic sales growth stabilized after slowing sharply in 2H10. 1Q11 organic sales grew 2% compared to our 1% estimate principally due to better growth in Latin America and WEMEA. The company is offsetting commodity headwinds. Foreign currency and pricing drove 80bp on GM expansion in the quarter. We expect upward revisions on the stable-to-improving sales outlook and as favorable forex lifts sales and margins. Even so, we remain Sell-rated on the stock. Although the top-line is likely to recover through 2011, we still expect growth to remain muted at 5% or less. It could take time to regain momentum with representatives after supply chains issues in Brazil. A weak consumer continues to be a drag on Russia. Free-cash flow also remains an issue. 1Q11 free-cash flow missed our forecast on elevated inventory levels. We expect FY2011 free-cash conversion of about 50%, the fifth straight year of sub-par cash flow versus a peer group average of over 90%." Shares of AVP closed at $30.91 yesterday.