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Why Adding Tiffany (TIF) May Hurt Your Portfolio's Return
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We had learnt in school that “A stitch in time saves nine.” It simply means that a timely action can prevent some serious loss later on. How about applying the same principle to your portfolio? It would be prudent to exit underperforming stocks to avoid hurting your portfolio’s returns. Tiffany & Co. , the jewelry retailer, is one such stock that carries a Zacks Rank #4 (Sell) and has lost its value by nearly 12% in the past three months.
Dwindling Top- & Bottom-Line Performance
Tiffany's dwindling top- and bottom-line results remain the primary concern for investors. A look at the company's performance in fiscal 2015 unveils that earnings per share fell 7.9% and 3% year over year in the third and fourth quarters, respectively. Maintaining the same chronological order, we observe that net sales also declined 2.2% and 6%, respectively. Moreover, the company witnessed a sluggish start to fiscal 2016 as earnings per share plunged 21%, while net sales declined 7% in the first quarter. A mature domestic market, foreign currency headwinds and cautious consumer spending continue to pose concerns.
Dismal Outlook
After registering a positive earnings surprise of 4.3% in the final quarter of fiscal 2015, Tiffany succumbed to a negative earnings surprise in the first quarter of fiscal 2016. Net sales also came in below the Zacks Consensus Estimate. Following a dismal performance, management provided a muted outlook for fiscal 2016.
Management anticipates earnings per share for fiscal 2016 to decrease by a mid-single-digit percentage from the prior year. The company had earlier projected earnings per share for the fiscal year to be flat to down in the mid-single digits. Tiffany envisions second-quarter earnings per share to decline at a rate equivalent to that of first-quarter fiscal 2016. The company envisions fiscal 2016 worldwide net sales to decrease by a low-single-digit percentage.
Consequently, the Zacks Consensus Estimate has been witnessing a downtrend. Analysts polled by Zacks are not convinced about the stock’s future performance. Over the past 60 days, the Zacks Consensus Estimate of $3.54 and $3.88 for fiscal 2016 and fiscal 2017 has decreased 20 cents and 18 cents, respectively. Moreover, the Zacks Consensus Estimate for the second quarter has dropped 9 cents to 71 cents 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 some better-ranked stocks such as The Children's Place, Inc. (PLCE - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Carter's, Inc. (CRI - Free Report) and Delta Apparel Inc. (DLA - Free Report) , both holding 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 >>
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Why Adding Tiffany (TIF) May Hurt Your Portfolio's Return
We had learnt in school that “A stitch in time saves nine.” It simply means that a timely action can prevent some serious loss later on. How about applying the same principle to your portfolio? It would be prudent to exit underperforming stocks to avoid hurting your portfolio’s returns. Tiffany & Co. , the jewelry retailer, is one such stock that carries a Zacks Rank #4 (Sell) and has lost its value by nearly 12% in the past three months.
Dwindling Top- & Bottom-Line Performance
Tiffany's dwindling top- and bottom-line results remain the primary concern for investors. A look at the company's performance in fiscal 2015 unveils that earnings per share fell 7.9% and 3% year over year in the third and fourth quarters, respectively. Maintaining the same chronological order, we observe that net sales also declined 2.2% and 6%, respectively. Moreover, the company witnessed a sluggish start to fiscal 2016 as earnings per share plunged 21%, while net sales declined 7% in the first quarter. A mature domestic market, foreign currency headwinds and cautious consumer spending continue to pose concerns.
Dismal Outlook
After registering a positive earnings surprise of 4.3% in the final quarter of fiscal 2015, Tiffany succumbed to a negative earnings surprise in the first quarter of fiscal 2016. Net sales also came in below the Zacks Consensus Estimate. Following a dismal performance, management provided a muted outlook for fiscal 2016.
Management anticipates earnings per share for fiscal 2016 to decrease by a mid-single-digit percentage from the prior year. The company had earlier projected earnings per share for the fiscal year to be flat to down in the mid-single digits. Tiffany envisions second-quarter earnings per share to decline at a rate equivalent to that of first-quarter fiscal 2016. The company envisions fiscal 2016 worldwide net sales to decrease by a low-single-digit percentage.
NY TIMES A Price, Consensus and EPS Surprise
NY TIMES A Price, Consensus and EPS Surprise | NY TIMES A Quote
Estimates Going Downhill
Consequently, the Zacks Consensus Estimate has been witnessing a downtrend. Analysts polled by Zacks are not convinced about the stock’s future performance. Over the past 60 days, the Zacks Consensus Estimate of $3.54 and $3.88 for fiscal 2016 and fiscal 2017 has decreased 20 cents and 18 cents, respectively. Moreover, the Zacks Consensus Estimate for the second quarter has dropped 9 cents to 71 cents 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 some better-ranked stocks such as The Children's Place, Inc. (PLCE - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Carter's, Inc. (CRI - Free Report) and Delta Apparel Inc. (DLA - Free Report) , both holding 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 >>