Earnings Preview: Tiffany

Tiffany & Company ( TIF - Analyst Report ) , a high-end jewelry designer, manufacturer and retailerand an S&P 500 company, is slated to report its first-quarter 2012 financial results on Thursday, May 24.

The current Zacks Consensus Estimate for the quarter is 69 cents a share that reflects a growth of 3% from the prior-year quarter’s earnings. The estimates in the current Zacks Consensus range between a low of 60 cents and a high of 76 cents a share. The Zacks Consensus revenue estimate is pegged at $818 million for the quarter under discussion.

Recap of Fourth-Quarter 2012

Tiffany posted lower-than-expected fourth-quarter 2011 results. The quarterly earnings of $1.39 per share missed the Zacks Consensus Estimate of $1.41, and deteriorated from $1.44 earned in the prior-year quarter.

Tiffany, which faces stiff competition from Signet Jewelers Limited ( SIG - Snapshot Report ) and Zale Corporation ( ZLC - Snapshot Report ) , posted net sales of $1,187.4 million during the quarter, up 8% from the prior-year quarter, on the heels of healthy performance by stores in the Americas, Asia-Pacific, Japan and European regions, comparable-store sales growth and new collection launches.

Total revenue also came ahead of the Zacks Consensus Estimate of $1,185 million. Comparable-store sales climbed 6% in the quarter under review. In constant currencies, net sales jumped 7% and comps grew 5%.

Zacks Agreement & Magnitude

The revisions in the estimates made by analysts in the last 30 days led to a penny’s decrease in the Zacks Consensus Estimate for the first quarter. In the last 30 days, only 1 out of 18 analysts covering the stock moved up the estimate and another trimmed the same. In the last 7 days, the Zacks Consensus Estimate has remained constant as none of the analysts revisited their estimates.

Mixed Earnings Surprise History

With respect to earnings surprises, Tiffany has missed as well as topped the Zacks Consensus Estimates over the last four quarters in the range of negative 2.1% to positive 22.9%. The average remained at positive 13.7%. This suggests that Tiffany has outperformed the Zacks Consensus Estimate by an average of 13.7% in the previous four quarters.

In the fourth quarter of fiscal 2011, the earnings missed the Zacks Consensus Estimate by 2.1%, whereas in the third, second and first quarters it beat the Estimate by 16.7%, 22.9% and 17.5%, respectively.

Closing Comment

No matter how short lived; the sparkles of Tiffany did come under the shadow, when the company posted lower-than-expected fourth-quarter 2011 results. However, that did not deter the company from providing a healthy outlook for fiscal 2012, highlighting the improving economic environment, despite nagging fears from the Euro zone.

Tiffany forecasts fiscal 2012 earnings in the range of $3.95 to $4.05, reflecting a growth of 10% to 13%. While gross margin is expected to remain under pressure for the next few quarters, management projects maximum earnings growth to take place in the concluding part of fiscal 2012.

If we closely scrutinize the earnings growth forecast, we observe that it has some proximity to the company’s long-term objective of at least a 15% growth but reflects a lower growth rate when compared with an increase of 23%, registered in fiscal 2011.

On the other hand, Tiffany now anticipates 10% growth in total net sales for fiscal 2012, aided by an increase in sales across the Americas and Asia-Pacific, compared with an increase of 18% registered in fiscal 2011. However, the sales guidance meets the lower end of the company’s long-term objective of a 10% to 12% sales increase.

Currently, we maintain our long-term “Neutral” recommendation on the stock. Moreover, Tiffany holds Zacks #3 Rank that translates into a short-term “Hold” rating.