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Tiffany & Co. (TIF) Stock Is a Crown Jewel Despite 52-Week High

TIF stock should continue to rise, despite the recent strength


Shares of Tiffany & Co. (NYSE:TIF), which logged a 52-week high of $94 per share last week, have been on a tear, soaring some 16% in the past three months. But it would be mistake to part ways with TIF stock, given the drastic improvements the New York-based high-end jeweler has made.

An All-Around Sparkling Quarter for Tiffany

Tiffany stock on Friday rose almost 3% after the company not only reported solid quarterly results, but the management also promised to a return to revenue growth for fiscal 2017. Notably, this is even though the company, which reported 3% decline in fourth-quarter profit, continues to struggle in both U.S. and European sales.

During the holiday quarter, revenue rose to $1.23 billion from $1.21 billion last year, and thanks to strong demand in China and a double-digit spike in Japan, beat Wall Street expectations of $1.22 billion.

Asia-Pacific region sales rose 9% to $284 million on new store openings, while revenue in Japan jumped 15% to $185 million with comparable store sales up 19%.

The company saw a 1.5 percentage-point increase in gross margin, reaching 62.2% of revenue, up from 60.7% a year ago. This lead to earnings of $1.45 per share. Though that was down a penny from last year, it easily beat Street estimates by 7 cents. The combination of rising gross margin and the earnings beat suggests despite sluggish demand in its largest markets — U.S. and Europe (down 7%) — Tiffany held strongly to its premium pricing.

What really excited investors about TIF stock was the fact that the management, which cited “macroeconomic and geopolitical challenges” for sluggish full-year revenue (down 3%), said Tiffany will return to sales growth in 2017. This means the two straight years of revenue declines are coming to an end. Interim CEO Michael Kowalski, chairman of Tiffany’s board, has created confidence since taking over for Frederic Cumenal, who stepped down on Super Bowl Sunday.

“We strongly believe that Tiffany’s strategies are sound and that we have meaningful growth opportunities,” Kowalski said in a release.

As it stands, with the company’s profits now expected to rise faster than revenue, owing to improving profit margins, TIF stock, which is still down some 15% from its all-time high, should rise too. Luxury demand should re-accelerate, especially as global Chinese spending continues to improve.

Bottom Line for TIF Stock

TIF stock, which now trades at 22 times fiscal 2018 estimates of $4.27 per share might not seem like a bargain, compared to the S&P 500 index, but those estimates assumes no margin expansion, which is now underway. As such, the combination of low expectations and possible upside in Tiffany’s business makes TIF stock — which should reach $110 — attractive when looking out for the next 12 to 18 months.

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

Article printed from InvestorPlace Media,

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