Tiffany Stock’s a Dud as Long as the Dollar Stays High (TIF)

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Tiffany & Co. (TIF) earnings were so ugly, investors have no choice but to accept that TIF stock is a no-go area as long as the U.S. dollar remains elevated.

tifThe strong dollar is a problem for all U.S. multinationals — it makes their goods more expensive overseas, while also reducing their value — but few are suffering as much as TIF.

More than half of TIF’s revenue comes from overseas sources. Heck, a big chunk of domestic revenue come from overseas, too. About a quarter of Tiffany’s U.S. sales come from foreign tourists. At the retailer’s flagship location in Manhattan, that figure comes to more than 40%.

Put it all together and currency effects nullified any growth in revenue. Indeed, the top line would have grown 7% year-over-year if the value of the dollar had remained constant; instead, revenue was flat.

In some ways, the dollar obscured areas of real strength. In Europe, same-store sales — an important measure of a retailer’s health — would have been up a whopping 20% had the dollar not taken off. Canada and Latin America would have generated quite decent sales growth of 4% if not for a rising greenback.

Unfortunately for TIF — and investors in Tiffany stock — those forex adjustments don’t count in the real world. The harsh reality is that currency effects caused TIF to miss Wall Street estimates in the most recent quarter, as well as issue a downbeat forecast.

A Miss-and-Cut Quarter for TIF

For the most recent three-month period, Tiffany earnings fell to $104.9 million, or 81 cents per share, down from $124.1 million, or 96 cents per share, in the same period a year ago.

On an adjusted basis — which is what the market cares about — earnings were 86 cents per share — well short of analysts’ average forecast of 91 cents, according to a survey by Thomson Reuters.

Sales ticked down to $990.5 million. The Street was looking for revenue to hit $1 billion.

Worst of all, Tiffany earnings included the equivalent of a forecast cut. The company now expects full-year earnings per share to come in at 2% to 5% below last year’s level of $4.20. TIF previously expected growth, albeit slow growth.

The Street was projecting full-year earnings at $4.26 per share, but that’s going to come down in a hurry as analysts update their models.

At some point, Tiffany stock might get beaten down enough to buy on valuation, but at nearly 17.5 times forward earnings, we’re not there yet.

Besides, a bet on Tiffany stock is also a bet on a drop in the value of the greenback, and there’s nothing on the horizon to suggest that’s coming anytime soon. As long as the dollar remains a headwind, you can take a pass on this name.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/tiffany-earnings-tif-stock/.

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