Tiffany & Company (TIF), a high-end jewelry designer, manufacturer and retailer, recently posted fourth-quarter 2010 results.
Street analysts had nearly a week to ponder the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Earnings Report Review
Tiffany’s quarterly earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.39, and rose substantially from $1.09 earned in the prior-year quarter, buoyed by the improved demand for luxury items worldwide.
Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), posted net sales of $1,101.2 million during the quarter, up 12% from the prior-year quarter, on the back of stellar performance of new stores opened in Americas, Asia-Pacific and European regions, healthy same-store sales growth and new collection launches.
Total revenue also beat the Zacks Consensus Revenue Estimate of $1,092 million. Comparable-store sales climbed 11% in the quarter under review. In constant currencies, net sales jumped 11% while comps grew 9%.
Tiffany slashed its first-quarter 2011 earnings guidance to 57 cents a share down from 62 cents forecasted earlier. Management now expects first quarter sales to increase 11%, taking into account a 15% drop in sales from Japan.
The company anticipates total net sales for fiscal 2011 to rise between 12% and 14% and earnings in the range of $3.35 to $3.45, reflecting a growth of 14% to 18%.
(Read our full coverage on this earnings report: Tiffany Shines, Japan Dims Outlook)
Agreement of Estimate Revisions
Clearly, a mixed sentiment is palpable among analysts, following the earnings release. In the last 7 days, 8 out of the 16 analysts covering the stock increased their estimates while only one lowering the estimate for first-quarter 2011. For second-quarter 2011, 3 analysts revised their estimates in the upward direction, while an equal number of analysts chopped their estimates in the last 7 days.
For fiscal 2011 and 2012, 13 and 8 analysts, respectively, have increased their estimates in the last 7 days, with only 1 analyst lowering the projection for fiscal 2011 and 2012.
Magnitude of Estimate Revisions
In the last 7 days, the Zacks Consensus Estimate for fiscal 2011 rose by 9 cents to $3.31, and for fiscal 2012, the Estimate climbed by 11 cents to $3.81.
For the first-quarter 2011, the Zacks Consensus Estimate jumped by a penny to 56 cents, and for the second-quarter 2011, it inched down by a penny to 63 cents a share in the last 7 days.
The current Zacks Consensus for first-quarter 2011 is pegged at a range from a low of 51 cents to a high of 57 cents. For fiscal 2011, the estimates range from $3.08 to $3.44.
Our View
We believe Tiffany is well positioned to support robust sales and earnings growth by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. Moreover, with nearly half of the total sales generated internationally, we believe that the company is well diversified from a regional perspective.
Further, Tiffany has been consistently enhancing shareholders’ returns through share repurchases and dividends. The company increased its quarterly dividend twice in 2010, reflecting a cumulative increase of 47%, and recently announced a new share repurchase program of $400 million, which is set to expire on January 31, 2013.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels and high household debt levels, which may negatively impact their discretionary spending, and in turn hurt the company’s growth and profitability.
Currently, we have a long-term Neutral rating on the stock. However, Tiffany holds a Zacks #2 Rank, which translates into a short-term Buy rating.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, 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
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