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After years of anemic sales and earnings growth, Tiffany (TIF) reported surprisingly strong earnings for the third quarter. Now that shares have broken through to an all-time high, could this be a sign of better times to come for the luxury jeweler? Let’s take a closer look.
Characterized by its powder blue gift boxes, Tiffany is a globally recognized name in high-end jewelry, especially diamonds. With its headquarters in New York City, Tiffany employs 9,900 employees around the world. This company was one of the few high-end retailers that refuses to discount their merchandise during the recession, going so far as to state that to do so would be a breach of trust and a lessening of the value of their brand.
Tiffany reported that its third-quarter net sales came in at $911.5 million, while earnings came in at 73 cents per share. Compared with Q3 2012, this represents 7% sales growth and 50% earnings growth. The company outperformed analyst earnings estimates, which called for earnings of 58 cents per share, as well as the consensus sales estimate of $889.5 million. Due to these stronger than expected results, shares of TIF gapped up at Tuesday’s open.
Meanwhile, management raised its earnings guidance for fiscal 2013: Tiffany’s now expects net earnings in the range of $3.65 to $3.75 per share, compared with its previous estimate of $3.50 to $3.60 per share. This is above the $3.62 Street view.
Further, the company still plans to open 16 new stores in 2013: six in the Americas, seven in Asia-Pacific and three in Europe. For the current year, the consensus forecast calls for 5.7% annual sales growth and 11.4% earnings growth.
Looking ahead to next year, analysts expect Tiffany to post 7.9% sales and 13.5% earnings growth. So it’s looking like Tiffany’s plans for international growth will pay off soon enough.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. Fundamentally, Tiffany has improved. While the company receives C-ratings for sales growth, operating margin growth and cash flow, it receives B-ratings for the other five metrics related to earnings.
This includes earnings growth, earnings momentum, earnings surprises, earnings revisions and return on equity. So TIF receives a B for its Fundamental Grade.
However, institutional buying pressure has remained stagnant, so the stock has fluctuated between hold and sell territory for the past five months. TIF receives a D for its Quantitative Grade.
Bottom Line: As of this posting, August 27, I consider TIF a D-rated Sell. The latest report could help lift this stock’s Total Grade, but we would need to see buying pressure pick up significantly to see TIF be justified as a buy.