Morgan Stanley cut its investment recommendation on Avon Products (AVP) to equalweight from overweight.
Analyst Bill Pecoriello cited increased uncertainty over the company's fundamentals. He said he's no longer sure that shares will not turn out to be a value trap. The company expects flat to down operating profit and a low-to-mid single digit rise in 2005 earnings per share on a mid-single digit rise in revenue. The analyst cut his price target to $31 from $45. He changed his earnings per share estimates as follows: for 2005 to $1.82 from $2.05, for 2006 to $1.62 from $1.99, and for 2007 to $1.78 from $2.19. The analyst cited a third quarter shortfall, as well as spending risk to regain traction in the U.S., Russia, Latin America, as well as continued China disruption.