About a month has gone by since the last earnings report for Tiffany & Co.TIF . Shares have added about 12.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Tiffany Q3 Earnings & Sales Top Estimates, View Intact
Tiffany posted sixth straight quarter of positive earnings surprise, when it reported third-quarter fiscal 2017 results. This designer and retailer of fine jewelry posted quarterly earnings of 80 cents a share that beat the Zacks Consensus Estimate of 76 cents and increased approximately 5% from the year-ago period on account of higher sales and improved margins.
Net sales came in at $976.2 million, up 3% from $949.3 million recorded in the prior-year quarter and came ahead of the Zacks Consensus Estimate of $960 million. The company registered sturdy sales in the Fashion Jewelry and the High, Fine & Solitaire Jewelry categories. However, comparable-store sales (comps) declined 1%. In constant currencies, worldwide net sales jumped 3%.
Tiffany's omni-channel platform, store expansion programs, tapping of new markets and venturing into new revenue generating avenues bode well for the stock.
Let's Delve Deeper
By geographic segments, sales in the Americas climbed 1% to $421 million, while comps also increased by an equivalent rate. Sales in the Asia-Pacific region surged 15% to $283 million, while comps grew 2%. Sales in Japan declined 8% to $139 million, while comps also declined by the same rate. Sales in Europe came in at $110 million, up 5% but comps decreased by 3%. Other sales came in at $23 million, down 26%, while comps increased 7%.
Gross margin expanded 30 basis points to 61.3% during the quarter on account of favorable product input costs, partially offset by rise in wholesale sales of diamonds. Operating margin increased 10 basis points to 16.4%.
In the first nine months of fiscal year, Tiffany has opened seven stores and shuttered five locations. As of October 31, 2017, the company operated 315 stores (125 in the Americas, 86 in Asia-Pacific, 54 in Japan, 46 in Europe, and four in the U.A.E.). Management now anticipates gross retail square footage growth of 2% via nine openings, seven relocations and seven closings.
Other Financial Details
Tiffany ended the quarter with cash and cash equivalents and short-term investments of $1,009.4 million, and total short-term and long-term debt of $1,072.4 million, reflecting 34% of shareholders equity.
During the quarter, the company repurchased approximately 300,000 shares at an average cost of about $92 per share. As of October 31, 2017, the company had $250 million remaining under its $500 million buyback program that run through Jan 31, 2019.
Management anticipates capital expenditures in the band of $235-$250 million and expects to generate free cash flow of approximately $450 million during fiscal 2017.
Management continues to anticipate fiscal 2017 earnings per share to increase by a high-single-digit percentage from fiscal 2016 earnings of $3.55. However, it expects earnings to jump mid-single-digit-percentage over adjusted earnings of $3.75 per share reported in fiscal 2016. Tiffany now envisions fiscal year net sales to increase by a low-single-digit percentage on a reported and constant-exchange-rate basis.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last month as none of them issued any earnings estimate revisions.
Tiffany & Co. Price and Consensus
At this time, Tiffany's stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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