Tiffany & Company (TIF) sustained its positive earnings surprise for the second consecutive quarter in fiscal 2014 hinting that the company is gradually regaining sheen. After a positive surprise of 26% in the first quarter, second-quarter earnings surpassed the Zacks Consensus Estimate by 11.6%. Shares of this designer, manufacturer and retailer of fine jewelry have advanced roughly 10.1% so far in the year.
Estimates have been showing an uptrend since the second-quarter earnings were announcement on Aug 27. The better-than-expected results triggered a northward movement in the Zacks Consensus Estimate, as analysts became constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that increased 1.4% to $4.34 for fiscal 2014 in the past 30 days. For fiscal 2015, the Zacks Consensus Estimate jumped 1% to $4.90 in the same period.
We observe that both top and bottom lines came ahead of the Zacks Consensus Estimate. The company delivered earnings of 96 cents a share, way ahead of the Zacks Consensus Estimate of 86 cents and higher than the prior-year quarter’s 83 cents. Results benefited from higher sales and improved gross margin. Tiffany posted net sales of $992.9 million, up 7% from the prior-year quarter, driven by healthy performance primarily across the Americas and Asia-Pacific regions, and ahead of the Zacks Consensus Estimate of $990 million.
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 as well.
The company holds a significant position in the world jewelry market, and its long-term growth prospects remain encouraging given its product launches and focus on enhancing geographic reach through the store expansion program.
However, Tiffany is witnessing softening demand across Japan and Europe that is resulting in sluggish sales performance. During the second quarter, sales in Japan fell 10%, while comparable-store sales also decreased 13%. Sales in Europe inched up 1%, while comparable-store sales fell 8% (all in constant currencies).
The pros and cons embedded in the stock are well supported by Tiffany’s Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the retail sector include Citi Trends, Inc. (CTRN) and Lithia Motors Inc. (LAD) both sporting a Zacks Rank #1 (Strong Buy), as well as Signet Jewelers Limited (SIG) with a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment