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Tiffany & Company (TIF - Analyst Report), a high-end jewelry designer, manufacturer and retailer, recently posted better-than-expected second-quarter 2011 results buoyed by improved demand for luxury items worldwide and consequently raised its full-year outlook.

Street analysts had nearly a week to ponder on the news. In the subsequent paragraphs, we cover the recent earnings announcement, analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation on the stock.

Earnings Report Review

Tiffany’s quarterly earnings of 86 cents a share surpassed the Zacks Consensus Estimate of 70 cents, and rose substantially from 55 cents earned in the prior-year quarter.

Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG - Snapshot Report) and Zale Corporation , posted net sales of $872.7 million during the quarter, up 30% from the prior-year quarter, on the heels of – stellar performance of stores in Americas, Asia-Pacific, Japan and European regions, healthy comparable-store sales growth and new collection launches.

Total revenue also handily beat the Zacks Consensus Estimate of $787 million.

Tiffany raised its fiscal 2011 earnings guidance on the back of stronger-than-expected results. Tiffany forecasts earnings in the range of $3.65 to $3.75, reflecting growth of 25% to 28%.

Earlier, management had forecasted earnings in the range of $3.45 to $3.55 per share.

Tiffany now anticipates a high-teens percentage rise in total net sales for fiscal 2011. Management expects a high-teens percentage increase in sales in the Americas, approximately 30% rise in the Asia-Pacific, about 20% in European regions, and a high-single digit percentage jump in Japan. Other sales are projected to soar by 25%.

(Read our full coverage on this earnings report:Tiffany Brightens Outlook)

Agreement of Estimate Revisions

A positive inclination is clearly evident among majority of the analysts, following the earnings release. In the last 7 days, 5 out of the 19 analysts covering the stock increased their estimates while 3 lowered the estimate for third-quarter 2011. For fourth-quarter 2011, 7 analysts revised their estimates in the upward direction, while 3 analysts chopped their estimates in the last 7 days.

For fiscal 2011 and 2012, 13 and 12 analysts, respectively, have increased their estimates in the last 7 days, while none of the analysts lowered the projection for fiscal 2011 and 2012.

Magnitude of Estimate Revisions

For the third and fourth quarters of 2011, the Zacks Consensus Estimate inched up by a penny to 59 cents and $1.64 a share, respectively in the last 7 days.

In the last 7 days, the Zacks Consensus Estimate for fiscal 2011 rose by 19 cents to $3.74, and for fiscal 2012, the Estimate increased by 12 cents to $4.24.

The current Zacks Consensus for third-quarter 2011 is pegged from a low of 52 cents to a high of 66 cents. For fiscal 2011, the estimates range from $3.50 to $3.85.

Tiffany Holds Zacks #2 Rank

Currently, we have a long-term ‘Neutral’ rating on the stock. However, Tiffany holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.

We believe Tiffany is well positioned to support robust sales and earnings growth 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.

Tiffany boasts a significant position in the world jewelry market due to its distinctive brand appeal. The company intends to expand its distribution network by adding stores in both new and existing markets.

The company is focused on opening smaller stores that offer select collections of lower priced higher-margin products. Tiffany concentrates on improving sales per square foot by increasing customer traffic and converting them into buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.

The jewelry market was hit hard by the recent global meltdown, which triggered a shift in focus to cheaper private label brands, but as the recession eased demand for luxury items also improved. Tiffany is well positioned to deliver robust sales and earnings growth. The company holds a significant position in the world jewelry market and is poised to benefit from its increased geographic reach.

However, due to high exposure to international markets, Tiffany remains prone to currency fluctuations. The weakening of foreign currencies against the U.S. dollar may require the company to either raise prices or settle for lower profit margins in locations outside of the U.S.A rise in price may have a direct impact on the demand.

Moreover, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their discretionary spending, and in turn the company’s growth and profitability.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/

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