Earnings Scorecard: Tiffany - Analyst Blog


Tiffany & Company ( TIF ) posted lower-than-expected fourth-quarter 2011 bottom-line results. However, that did not dissuade the company from providing a healthy outlook for fiscal 2012, highlighting the improving economic environment, despite nagging fears from the Eurozone.

In the paragraphs that follow, we cover the recent earnings announcement, subsequent estimate revisions by analysts as well as the Zacks Rank and long-term recommendation for the stock.

Last Quarter Synopsis

Tiffany reported its fourth-quarter 2011 results on March 20, 2012. The quarterly earnings of $1.39 per share missed the Zacks Consensus Estimate of $1.41, and dropped from $1.44 earned in the prior-year quarter. Despite registering a growth in the top line, the company witnessed a drop in the bottom line due to a 9% rise in the cost of sales and a 10% increase in SG&A expenses.

Tiffany, which faces stiff competition from Signet Jewelers Limited ( SIG ) and Zale Corporation ( ZLC ), posted net sales of $1,187.4 million during the quarter, up 8% from the prior-year quarter, on the heels of healthy performance by stores in the Americas, Asia-Pacific, Japan and European regions, comparable-store sales growth and new collection launches.

Total revenue also came ahead of the Zacks Consensus Estimate of $1,185 million. Comparable-store sales climbed 6% in the quarter under review. In constant currencies net sales jumped 7% and comps grew 5%.

Management provided fiscal 2012 guidance. The company forecasts earnings in the between $3.95 and $4.05. It anticipates a 10% growth in total net sales for fiscal 2012, aided by an increase in sales across the Americas and Asia-Pacific.

(Read our full coverage on this earnings report: Tiffany Misses on Bottom-Line )

Agreement of Estimate Revisions

The agreement of estimate revisions indicates that the majority of analysts were unidirectional following Tiffany's results.

In the last 7 days, 2 out of 17 analysts covering the stock raised their estimates, whereas 2 analysts lowered the same for the first quarter of 2012. For the second quarter, 5 analysts revised their estimates upward and 2 analysts made downward revisions.

For fiscal 2012, 8 analysts increased their estimates, while 1 of the analysts revised the estimate in the downward direction in the last 7 days. As for fiscal 2013, 4 analysts made upward revisions to their estimates, while none lowered the same.

What Drives Estimate Revisions

Analysts covering the stock have been tweaking their estimates to better align with management's guidance range of $3.95 to $4.05, reflecting a growth of 10% to 13%. If we closely scrutinize the earnings growth forecast, we observe that it has a little proximity to the company's long-term objective of at least a 15% growth.

Further, Tiffany's fiscal 2012 sales growth projection of 10%, which remains in line with its long-term objective of a 10% to 12% sales increase, also impressed the analysts.

However, some of the analysts remained on the back foot, as fourth-quarter 2011 earnings missed the Zacks Consensus Estimate by a couple of cents, and also dropped from the prior-year quarter. Moreover, some of the analysts also remained cautious as sales growth decelerated to 8% from 24% growth registered in the first nine months of 2011. 

Magnitude of Estimate Revisions

The magnitude of estimate revisions by the analysts is clearly reflected through changes in the Zacks Consensus Estimates.

The Zacks Consensus Estimate for the first quarter of 2012 jumped by a penny to 70 cents a share in the last 7 days. For the second quarter, the estimate climbed 2 cents to 85 cents a share.

For fiscal 2012 and 2013, the Zacks Consensus Estimates jumped 8 cents and 4 cents to $4.00 and $4.57, respectively, in the last 7 days.

Closing Commentary

Tiffany holds a significant position in the world jewelry market and is poised to benefit from its increased geographic reach. The company generates nearly half of its total sales internationally. We believe that Tiffany is well positioned to deliver robust sales and earnings growth.

The company is focused on opening smaller stores that offer select collections of lower-priced, higher-margin products, which in turn boost store productivity. Tiffany concentrates on improving sales per square foot through higher customer traffic and their conversion into potential buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.

The company intends to expand its distribution network by adding stores in both new and existing markets. On the international side, the company is now concentrating on expanding business in Middle East, Russia, Brazil and India.

Currently, we maintain our long-term Neutral recommendation on the stock. Moreover, Tiffany holds a Zacks #2 Rank that translates into a short-term Buy rating.

About Earnings Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These "Earnings Estimate Scorecard" articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education

SIGNET GRP PLC ( SIG ): Free Stock Analysis Report
TIFFANY & CO ( TIF ): Free Stock Analysis Report

ZALE CORP NEW ( ZLC ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: SIG , TIF , ZLC



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