Tiffany & Company (TIF), a high-end jewelry designer, manufacturer and retailer, recently posted first-quarter 2011 results.
Street analysts had nearly a week to ponder on the news. In the subsequent paragraphs, we cover the recent earnings announcement, analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Earnings Report Review
Tiffany’s quarterly earnings of 67 cents per share surpassed the Zacks Consensus Estimate of 57 cents, and rose substantially from 48 cents earned in the prior-year quarter.
The earnings also came well ahead of the company’s previous guidance of 57 cents a share.
Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), posted net sales of $761.0 million during the quarter, up 20.0% from the prior-year quarter, on the back of stellar performance of stores in Americas, Asia-Pacific and European regions, healthy same-store sales growth and new collection launches.
Total revenue also handily beats the Zacks Consensus Estimate of $703 million. Comparable-store sales climbed 19% in the quarter under review. In constant currencies, net sales jumped 16% and comps grew 15%.
Tiffany raised its fiscal 2011 earnings guidance on the back of stronger-than-expected results. Tiffany forecasts earnings in the range of $3.45 to $3.55, reflecting a growth of 18% to 21%.
Tiffany now anticipates a mid-teens percentage rise in total net sales for fiscal 2011. Management expects a mid-teens percentage increase in sales in the Americas, and a mid-20s percentage rise in the Asia-Pacific and European regions. However, management forecasts sales in Japanto decline modestly. Other sales are projected to soar by 25%.
(Read our full coverage on this earnings report: Tiffany Shines, Raises Outlook)
Agreement of Estimate Revisions
Clearly, a positive sentiment is palpable among analysts, following the earnings release. In the last 7 days, 11 out of the 16 analysts covering the stock increased their estimates with only one lowering the estimate for second-quarter 2011. For third-quarter 2011, 9 analysts revised their estimates in the upward direction, while one analyst chopped the estimate in the last 7 days.
For fiscal 2011 and 2012, 15 and 9 analysts, respectively, have increased their estimates in the last 7 days, with only 1 analyst lowering the projection for fiscal 2012.
Magnitude of Estimate Revisions
In the last 7 days, the Zacks Consensus Estimate for fiscal 2011 rose by 22 cents to $3.55, and for fiscal 2012, the Estimate climbed by 21 cents to $4.04.
For second-quarter 2011, the Zacks Consensus Estimate jumped by 4 cents to 68 cents, and for third-quarter 2011, it went up by 2 cents to 57 cents a share in the last 7 days.
The current Zacks Consensus for second-quarter 2011 is pegged at a range from a low of 62 cents to a high of 77 cents. For fiscal 2011, the estimates range from $3.44 to $3.79.
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’ return through share repurchases and dividends. The company recently increased its quarterly dividend by 16%. This is the ninth time the company has hiked its dividend in the last nine years. In January 2011, the company announced a new share repurchase program of $400 million, which is set to expire on January 31, 2013.
The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn, boosts store productivity. Tiffany concentrates on improving sales per square foot through an increase in customer traffic and converting them into potential buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.
Currently, we have a long-term “Outperform” 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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