Are Signet Jewelers Limited (SIG) and Tiffany & Company (TIF) part of your portfolio? Well, given their underlying factors and the nearing holiday season, these stocks may be good picks. The economy looks much more balanced now with no imminent hike in interest rates, consumer confidence moving north, job market conditions gradually improving and the bond-buying program nearing its end. Retailers are thus hopeful of solid business.
Signet Ready to Sparkle
Signet’s primary strength is its earnings surprise history. The company has outperformed the Zacks Consensus Estimate in 11 out of the past 14 quarters, with an average beat of 8.6%. In the last concluded quarter, this jewelry retailer outdid the Zacks Consensus Estimate by 1%. The stock holds a Zacks Rank #2 (Buy) and has surged roughly 46% year to date, demonstrating its inherent strength and long-term earnings growth projection of 8%.
The company remains focused on store remodeling, digital enhancement as well as outlet channel development. This led Signet to post better-than-expected second-quarter fiscal 2015 results. On an organic basis, the company posted earnings per share of $1.00 that came a penny ahead of the Zacks Consensus Estimate and increased 19% year over year. On an adjusted basis – including organic earnings as well as earnings attributable to Zale division’s 65 days performance – earnings were $1.01 per share.
Total sales of $1,225.9 million jumped 39.3%, driven by healthy performance of stores in the U.K. division and the acquisition of Zale. On an organic basis, revenues were $978.4 million, up 11.2%. The Zacks Consensus Estimate was $1,163 million.
Signet now projects adjusted earnings of 12–18 cents a share for the third quarter and $5.38 to $5.54 for fiscal 2015.
Tiffany Shining
After missing the Zacks Consensus Estimate in the final quarter of fiscal 2013, Tiffany is back in the game as it posted two consecutive quarters of earnings beat in fiscal 2014 implying that it is gradually regaining its sheen. After a positive surprise of 26% in the first quarter, second-quarter earnings surpassed the Zacks Consensus Estimate by 11.6%. Moreover, the long-term earnings growth projection of 13% for this Zacks Rank #3 (Hold) stock is also encouraging.
Tiffany delivered second-quarter earnings of 96 cents a share that beat the Zacks Consensus Estimate of 86 cents and improved from the prior-year quarter’s 83 cents. Results benefited from an increase in both sales and gross margin. The company posted net sales of $992.9 million, up 7% on the back of healthy performance across the Americas and Asia-Pacific regions and also came ahead of the Zacks Consensus Estimate of $990 million.
Following healthy results, Tiffany raised its earnings expectations. The company now projects fiscal 2014 earnings between $4.20 and $4.30 per share against $4.15 and $4.25 expected earlier, and reflects 13% to 15% year-over-year growth.
We believe Tiffany is well positioned to support robust sales and witness earnings growth in the long run by leveraging from 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. However, softening demand across Japan and Europe remains a concern. But don't ignore the company’s strong fundamentals.
Stocks Portraying an Uptrend in Zacks Consensus Estimate
Estimates for both Signet and Tiffany have been portraying an uptrend as an outcome of their impressive second-quarter results. It seems that analysts have become constructive on the stocks’ future performance.
Signet’s Zacks Consensus Estimate has increased 1.8% to $5.51 for fiscal 2015 and 5.4% to $6.60 for fiscal 2016 in the past 30 days. The Zacks Consensus Estimate for Tiffany has climbed 1.4% to $4.34 for fiscal 2014 and 1% to $4.90 for fiscal 2015 in the same period.
We believe the above two stocks could be the bright spots in your portfolio over the long run.
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