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Earnings Preview: Tiffany

TIF SIG

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Tiffany & Company (TIF - Analyst Report) – a designer, manufacturer and retailer of high-end jewelry and other products – is slated to release its fiscal third-quarter 2012 (ended October, 2012) financial results on November 29, 2012. The current Zacks Consensus Estimate for the quarter stands at 62 cents per share, indicating a decline of 10.8% from the prior-year quarter's earnings of 70 cents a share. Revenue, as per the Zacks Consensus Estimate, is $858 million.

The decline in earnings per share is estimated mainly due to the company’s weak and lower-than-expected earnings in the last two quarters. Tiffany seems to be in an unfavorable position as the soft economic environment continues to take its toll on the company’s performance.

Recap of Second-Quarter

Tiffany’s fiscal second-quarter 2012 earnings of 72 cents a share, missing the Zacks Consensus Estimate by a couple of cents, and dropped sharply from 86 cents earned in the previous-year quarter. The disappointing result reflected the company’s dismal performance in the Americas and Europe region due to soft demand for jewelry.

Tiffany reported net sales of $886.6 million during the quarter, up 2% from the year-ago quarter, on the heels of healthy performance in the Asia-Pacific and Japan regions and new collection launches. However, total revenue fell short of the Zacks Consensus Estimate of $887 million. Comparable-store sales dropped 3% in the second quarter of 2012. In constant currencies, net sales jumped 3%, but comps edged down 1%.

Estimate Revisions Trend

Agreement

We do not see any estimate revisions at this point. Of the total 17 estimates for the stock, none have been revised either in the upward or downward direction for the upcoming quarter in the last 7 or 30 days. The story remains the same for fiscal 2012 (with 18 estimates for the stock.

Analysts kept their estimates intact, in the absence of any major news having a direct or indirect impact on the estimates.

Magnitude

In the absence of estimate revisions, the Zacks Consensus Estimate remained stable at 62 cents and $3.59 for the third quarter and fiscal-year 2012, respectively, over the last 7 or 30 days.

Mixed Earnings Surprise History

With respect to earnings surprise, Tiffany missed the Zacks Consensus Estimate for the consecutive last three quarters. However, in the third quarter of fiscal 2011, the company beat the Zacks Consensus Estimate. Therefore, the average of earnings surprise came to a positive 1.15% for the last four quarters.

Our Take

We will have to wait and watch how the company performs, as the year progresses. Currently, we maintain our long-term Neutral recommendation on Tiffany, a peer of Signet Jewelers Limited (SIG - Snapshot Report). Moreover, the stock carries a Zacks #3 Rank that translates into a short-term Hold rating.

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