Tiffany & Company
), a high-end jewelry designer, manufacturer and retailer, posted
lower-than-expected first-quarter 2012 bottom-line result. The
disappointment reflected dismal performance in the Americas region
due to soft demand for jewelry. Given the weaker-than-expected
results and sluggish economic recovery in most of the countries,
management trimmed its fiscal 2012 outlook.
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 first-quarter 2012 results on May 24, 2012.
The quarterly earnings of 64 cents a share missed the Zacks
Consensus Estimate of 69 cents, and dropped from 67 cents 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 10%
rise in the cost of sales and an 11% increase in selling, general
and administrative expenses.
Tiffany, which faces stiff competition from
Signet Jewelers Limited
), posted net sales of $819.2 million during the quarter, up 8%
from the prior-year quarter, on the heels of healthy performance of
stores in the Asia-Pacific and Japan regions, comparable-store
sales growth and new collection launches.
Total revenue came ahead of the Zacks Consensus Estimate of $818
million. Comparable-store sales climbed 4% in the quarter under
review. In constant currencies too, net sales jumped 8% and comps
(Read our full coverage on this earnings report:
Tiffany Misses, Trims Outlook
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, 10 out of 16 analysts covering the stock
lowered their estimates, whereas only 1 analyst raised the same for
the second quarter of 2012. For the third quarter, 11 analysts
revised their estimates downward and none made upward revision.
For fiscal 2012 and 2013, 15 and 11 analysts, respectively,
revised their estimates in the downward direction in the last 7
days, and none increased the same.
What Drives Estimate Revisions
Clearly, a negative sentiment is palpable among most of the
analysts, who remain pessimistic on Tiffany's performance.
Following the earnings release, the Zacks Consensus Estimates have
been portraying a downward trend with the majority of analysts
remaining bearish on the stock.
The lower-than-expected bottom-line results and a dismal
guidance failed to impress the analysts, who went on to make
downward revisions to their estimates in order to better align with
management's guidance range.
Tiffany now projects fiscal 2012 earnings in the range of $3.70
to $3.80 per share, down from $3.95 to $4.05 forecasted earlier,
reflecting an increase of 3% to 6%. Earlier, the company had
projected earnings growth of 10% to 13%. Moreover, management's
projection of earnings decline in the third and second quarters
also kept analysts on the back foot.
Further, analysts' confidence also fell because of total net
sales growth forecast of 7% to 8% for fiscal 2012 that was down
from 10% predicted previously, reflecting a soft macroeconomic
environment and tough year-over-year comparison in the second and
Tiffany did register a growth in the top line during the
quarter, but the increment was not enough to instigate a sense of
confidence among the analysts. However, what gave some respite to
the analysts was the company's commitment to achieve its long-term
objective of a 10% to 12% sales increase and at least 15% earnings
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 second quarter of 2012
dropped by 5 cents to 80 cents a share in the last 7 days. For the
third quarter, the Estimate fell 6 cents to 69 cents a share.
For fiscal 2012 and 2013, the Zacks Consensus Estimates slipped
27 cents and 23 cents to $3.71 and $4.36, respectively, in the last
Holds Zacks #3 Rank
Currently, Tiffany holds a Zacks #3 Rank that translates into a
short-term 'Hold' rating. Moreover, we have a long-term 'Neutral'
recommendation on the stock.
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
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