In our school days, we had read an idiom, “A stitch in time saves nine”, meaning that timely action may prevent serious loss later on. How about applying the same principle to your portfolio? Exiting the underperforming stock at the right time helps maximize your portfolio’s return. So, as an investor it would be a rational decision to shun from your portfolio a stock that has been witnessing falling share price and estimates, before it hurts your return.
Tiffany & Company TIF, the jewelry retailer, is one such stock whose share price has been plunging. The Zacks Consensus Estimate too has witnessed a downtrend.
From Stock Price Performance Perspective
Shares of Tiffany have been plunging and touched a 52-week low of $71.80 on Dec 18. Year to date, this Zacks Rank #4 (Sell) stock has nosedived approximately 28%. Moreover, shares have declined roughly 5.6% following the company’s last earnings release on Nov 24. It has been nearly a year since the stock hit a 52-week high. It had last reached the pinnacle on Dec 29, 2014.
From Last Quarter’s Performance Perspective
Tiffany continued with its dismal run, posting the second straight quarter of negative earnings surprise of 5.4% in third-quarter fiscal 2015, after an earnings miss of 4.4% in the preceding quarter. A strong U.S. dollar and increased SG&A expenses hurt the bottom line. Quarterly earnings of 70 cents a share missed the Zacks Consensus Estimate of 74 cents, and fell 7.9% from 76 cents delivered in the year-ago quarter.
Tiffany’s revenues for the third quarter also fell short of the Zacks Consensus Estimate. Net sales came in at $938.2 million, down 2.2% from $959.6 million recorded in the prior-year quarter, and way below the Zacks Consensus Estimate of $972 million. Net sales bore the brunt of foreign currency headwinds that lowered the value of sales generated in the overseas market and also resulted in reduced spending by tourists.
From Estimate Revisions Perspective
Following Tiffany’s discouraging performance and dull outlook, the Zacks Consensus Estimate witnessed a downtrend. The dismal results, global turbulence and the strong dollar compelled management to take a cautious stance. It now projects fiscal 2015 earnings to decline 5%–10% from $4.20 per share recorded a year ago. Earlier, the company had envisioned full-year earnings to drop 2%–5% from fiscal 2014.
Analysts polled by Zacks are not convinced about the stock’s future performance. Over the past 30 days, the Zacks Consensus Estimate of $3.86 and $4.31 per share for fiscal 2015 and fiscal 2016 has dropped 3.7% and 3.8%, respectively. Moreover, the Zacks Consensus Estimate for the fourth quarter has decreased 6.2% to $1.51 over the same time frame.
With Tiffany’s share price tumbling and estimates witnessing downward revisions, it would not be prudent to keep the stock in your portfolio, at least for the time being.
Stocks that Warrant a Look
Investors interested in the retail space may consider better-ranked stocks such as American Eagle Outfitters Inc. AEO, sporting a Zacks Rank #1 (Strong Buy), J. C. Penney Company, Inc. JCP and Foot Locker, Inc. FL, both carrying a Zacks Rank #2 (Buy).
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