Is Tiffany Gaining Sheen on Higher Sales? - Analyst Blog

After missing the Zacks Consensus Estimate in the final quarter of fiscal 2013, Tiffany & Company TIF is back in the game as it kick-started fiscal 2014 with an earnings beat. Shares of this designer, manufacturer and retailer of fine jewelry have gained roughly 4.4% since May 21, when it came out with its first-quarter results. It seems Tiffany is gradually gaining sheen.

Estimates have been showing an uptrend since the earnings announcement. The better-than-expected results triggered a northward movement in the Zacks Consensus Estimate, as analysts became more constructive on the stock's future performance that has advanced 9.1% so far in the year.

This is evident from the movement witnessed in the Zacks Consensus Estimate that increased 2.9% to $4.28 for fiscal 2014 in the past 30 days. For fiscal 2015, the Zacks Consensus Estimate jumped 2.3% to $4.86 in the same period.

We observe that both the top and bottom lines came ahead of the Zacks Consensus Estimate. The quarterly earnings of 97 cents a share beat the Zacks Consensus Estimate of 77 cents and the prior-year quarter earnings of 70 cents. Results benefited from higher sales and improved operating margin. Net sales of $1,012.1 million grew 13% from the prior-year quarter, and surpassed the Zacks Consensus Estimate of $953 million.

We believe Tiffany is well positioned to support robust sales and witness earnings growth in the long run 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 as well.

Management remains committed to attaining long-term objectives of at least 15% earnings growth and a 10–12% sales increase annually. Moreover, the company's long-term goal is to attain ROA of at least 10% and ROE of at least 15%.

The company holds a significant position in the world jewelry market, and its long-term growth prospects remain encouraging given its new product launches and focus on enhancing its geographic reach through the store expansion program.

Tiffany, which competes with Signet Jewelers Limited SIG, carries Zacks Rank #2 (Buy).

Other Stocks to Consider

Other better ranked retail stocks that look promising include Skechers USA Inc. SKX sporting Zacks Rank #1 (Strong Buy) and Hanesbrands Inc. HBI holding a Zacks Rank #2 (Buy).