Avon Products Inc on Friday posted a 33 percent increase in third-quarter profit, but continued concerns over weakness in the United states pushed the stock 7 percent lower.
The company raised its full-year profit outlook but forecast lower fourth-quarter US sales and profit.
"Without US, Avon becomes an emerging markets story with an inherently greater risk profile, which does not warrant above-group valuation," Andrew Shore, analyst at Deutsche Bank, wrote in a research note as he downgraded the stock to "hold" from "buy."
New York-based Avon reported a third-quarter profit of $176.9 million, or 37 cents a share, compared with $133.1 million, or 28 cents a share, a year earlier.
Analysts on average forecast 34 cents a share, according to Reuters Estimates.
Total revenue rose 11 percent to $1.81 billion. Sales would have been up 10 percent without a boost from the weaker dollar, which lifts the value of sales outside the United States.
Unit volume rose 15 percent and the company had 11 percent more active sales representatives in the quarter, compared with the year earlier.
US profit fell 9 percent and sales fell 1 percent on weak sales of colour cosmetics, higher freight costs and the impact of hurricanes during the quarter. The number of active representatives, a key measure for the company, was flat in the United States in the quarter.
"Rep growth is slowing to unacceptable levels and new launches have been abysmal," Shore said.
Low- and middle-income US consumers are being pressured by higher fuel prices and concerns about unemployment, Avon Chairman and Chief Executive Andrea Jung said in a conference call with analysts, citing the company's own research.
Latin American profit rose 18 percent, beating the company's expectations, on an 8 percent sales gain, with strength seen especially in Venezuela and Brazil, Avon said.
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