Market Overview

Tiffany Earnings Preview: Higher Revenue but Lower EPS Expected

Tiffany (NYSE: TIF), which plans to open a flagship store in Paris in 2014, is scheduled to report its third-quarter fiscal 2012 results Thursday, November 29, before the markets open. Investors will be looking to see the effects of the slowdown in luxury spending in China, as well as the impact on margins from higher diamond and silver costs. Tiffany is considered a bellwether of luxury spending.

Expectations

Analysts on average predict that Tiffany will report that revenue for the quarter rose more than four percent year-over-year to $859.11 million. But per-share earnings are expected to come to $0.63, down from $0.70 per share in the same quarter of last year. That consensus earnings estimate has remained unchanged in the past 60 days, even though Tiffany's fell short of analysts' expectations in the previous three quarters. The earnings miss was by less than two percent in the second quarter.

Tiffany attributed disappointing results in the second quarter to global economic weakness, as same-store sales in North America and Asia-Pacific declined, and the gross margin shrank on product acquisition costs. Furthermore, the company lowered its full-year EPS outlook and said it expects earnings to decline in the third quarter, followed by a resumption of growth in the fourth quarter. The share price slipped more than four percent in the week following the second-quarter report.

Looking ahead to the current quarter, which includes the holiday shopping season, the analysts' consensus forecast calls for EPS to rise about 13 percent year-on-year on sales that are more than nine percent higher. So far, full-year EPS are expected to be flat, relative to the previous year, on a rise of about six percent in revenues.

The Company

Tiffany & Co. is a leading manufacturer and retailer of fine jewelry and other luxury goods worldwide. It operates more than 250 stores and is headquartered in New York. It is an S&P 500 component with a market capitalization near $8 billion. The company was founded in 1837, and Michael J. Kowalski has been the chairman and chief executive since 2003.

Competitors include Blue Nile (NYSE: NILE), Signet Jewelers (NYSE: SIG) and Zale (NASDAQ: ZLC). Blue Nile's profit dropped in the third quarter but just beat estimates. Signet topped third-quarter EPS estimates by revenues fell short of expectations. Zale posted a bigger-than-expected net loss for its fiscal first quarter.

During the three months that ended in October, Tiffany announced the plans for its flagship store in Paris, bumped Staples (NYSE: SPLS) from the 345 spot on the S&P 500 and announced senior executive changes.

Performance

The long-term EPS growth forecast is almost 14 percent, and the return on equity is more than 18 percent. The price-to-earnings (P/E) ratio is greater than the industry average, but so is the operating margin. Tiffany's dividend yield is about 2.1 percent. Note that short interest is about eight percent of the float. Of the 24 analysts surveyed by Thomson/First Call who follow the stock, half recommend buying shares. Their mean price target represents almost 10 percent potential upside. However, that is still significantly lower than the 52-week high from back in March.

Though shares are up about nine percent in the past six months, the share price is still about 15 percent lower than a year ago. The share price is close to the 200-day and 50-day moving averages. Over the past six months, the stock has underperformed Blue Nile and Signet Jewelers.

Posted-In: Earnings Long Ideas News Guidance Short Ideas Previews Analyst Ratings Trading Ideas Best of Benzinga

 

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