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Still Neutral on Tiffany

Zacks Equity Research

We reiterate our Neutral recommendation on Tiffany & Company (TIF), the designer, manufacturer and retailer of fine jewelry, with a price target of $93.00.

Why Reiterate?

We believe Tiffany is well positioned to support robust sales and earnings growth in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes.

Tiffany showcased a strong operating performance during the third quarter of fiscal 2013 due to a surge in demand in the Asia-Pacific region and provided an upbeat earnings outlook. Higher sales and improved operating margin facilitated an increase in the bottom line. The quarterly earnings of 73 cents a share surpassed the Zacks Consensus Estimate of 58 cents and soared 49% from 49 cents in the prior-year quarter.

Tiffany, which currently holds Zacks Rank #2 (Buy), projects fiscal 2013 earnings between $3.65 and $3.75 per share, up from its previous forecast of $3.50 to $3.60.

The better-than-expected results triggered an uptrend in the Zacks Consensus Estimate, as analysts become more constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that went up 5% to $3.80 for fiscal 2013 and 3.2% to $4.22 per share for fiscal 2014 in the past 7 days. We believe that with more emphasis on the new collection, cost containment efforts, inventory management and global distribution platform, Tiffany remains well positioned to sustain the growth momentum in 2013 as well as in 2014.

While these create a positive bias on the stock, near-term headwinds, such as soft sales trends in the Americas, effects of a depreciated Japanese yen on the results and a sluggish economic recovery neutralizes it.

Other Stocks Worth Considering

Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Hanesbrands Inc. (HBI), carrying a Zacks Rank #1 (Strong Buy), Barnes & Noble, Inc. (BKS) and Five Below, Inc. (FIVE), both sporting a Zacks Rank #2 (Buy).

Read the Full Research Report on TIF
Read the Full Research Report on BKS
Read the Full Research Report on HBI
Read the Full Research Report on FIVE

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