We recently downgraded our recommendation on Tiffany & Company (TIF) to Underperform following its first-quarter 2012 results. The quarterly earnings of $0.64 per share missed the Zacks Consensus Estimate of $0.69, and fell from $0.67 earned in the prior-year quarter, in spite of posting 8% growth in the top-line.
The disappointing bottom-line result was a reflection of murky performance in the Americas region due to soft demand for jewelry. Given the lower-than-expected results and sluggish economic recovery, management trimmed its fiscal 2012 sales and earnings outlook. Tiffany now anticipates 7% to 8% growth in total net sales, down from 10% predicted previously. Management now projects earnings in the range of $3.70 to $3.80 per share, down from $3.95 to $4.05 forecasted earlier.
The stock is also trading at a discount to the peer group, based on forward earnings estimates. Our target price of $48.00, 12.9X 2012 EPS, reflects our Underperform view.
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