Tiffany Earnings Preview: Lower EPS, Higher Sales Forecast for Q2

Goldman Sachs

said earlier this week that any weakness in the earnings report of Tiffany & Co.

would be a buying opportunity. Tiffany is scheduled to report its second-quarter fiscal 2012 results Monday, August 27, before the markets open. Investors will be looking to see how big a hit the company took from slower global growth, Tiffany's reason for lowering its profit guidance in the first quarter.

Analysts on average predict that Tiffany will report per-share earnings of $0.74 for the three months that ended in July, as well as more than $891.6 million in revenue. In the same period of last year, the company reported a profit of $0.86 per share but about $872.7 million in revenue. Analysts have become less bullish, as their earnings per share (EPS) estimate has slipped in the past 60 days from $0.77. And analysts overestimated Tiffany's per-share earnings in the previous two quarters. Tiffany exceeded consensus EPS expectations in the seven quarters before that, though. In the first-quarter report, Tiffany attributed disappointing results to restrained consumer spending in the Americas and to competitive discounting. Also restrained spending from European tourists led to to a 4 percent decline in sales at Tiffany's flagship store in New York. The share price fell more than 8 percent following the report, and eventually tumbled 18 percent to a new 52-week low. Looking ahead to the current quarter, the consensus forecast calls for a 5.7 percent decline in EPS and an 4.9 percent rise in revenue compared to the year-ago numbers. And so far, analysts expect full-year per-share earnings growth of about 1.3 percent, as well as for revenue to be 6.2 percent higher than in the previous year.

New York-based Tiffany & Co. is a manufacturer and retailer of fine jewelry. The company also offers other luxury goods, such as sterling silver, china and crystal goods, and it operates about 250 stores worldwide. Tiffany is an S&P 500 component with a market capitalization near $7.4 billion. It was founded in 1837. Competitors include Signet Jewelers

and Zale

, as well as big-box stores like Target

. Signet this week posted better-than-expected second-quarter results, citing improvement in middle-class spending despite high unemployment and economic uncertainty. Zale is expected to post a net loss narrower than a year ago when it reports fiscal four-quarter results next week. During the three months that ended in July, Tiffany boosted its quarterly dividend by 10 percent. It presented Super Bowl rings to the New York Giants, elected a new board member and made a change to its executive compensation scheme. And the company released its second annual corporate responsibility report.

Tiffany's long-term EPS growth forecast is more than 12 percent. Its operating margin is higher than the industry average, and the return on equity is nearly 19 percent. It has a dividend yield of about 2.2 percent. Short interest is 8.5 percent of the float. But 13 of 24 analysts surveyed by Thomson/First Call who follow the stock rate the shares at Buy or Strong Buy; none recommend selling. Their mean price target, or where they expect the stock to go, is more than 13 percent higher than the current share price. The share price has risen more than 16 percent since reaching the 52-week low in late June, but shares are still down about 12 percent year to date. The share price is above the 50-day moving average. Over the past six months, the stock has underperformed Signet and Zale, as well as the broader markets.