A month has gone by since the last earnings report for Tiffany & Co. TIF. Shares have lost about 3.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is TIF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Tiffany Beats on Q4 Earnings & Sales, Guides for ’18
Tiffany posted seventh straight quarter of positive earnings surprise, when it reported fourth-quarter fiscal 2017 results. The company’s quarterly earnings came in at $ 1.67 per share surpassing the Zacks Consensus Estimate of $ 1.63. The bottom line was up 15% from the year-ago tally on account of higher sales.
Net sales came in at $ 1,334.3 million, up 9% from $ 1,229.6 million in the prior-year quarter. The reported figure outpaced the Zacks Consensus Estimate of $ 1,305 million, marking the third straight quarter of revenue beat. The outperformance was driven by robust performance across all product categories. Moreover, comparable-store sales (comps) were up 3%. In constant currencies, worldwide net sales rose 6% and comps inched up 1%.
Moreover, Tiffany’s omni-channel platform, store expansion programs, tapping of new markets and venturing into new revenue generating avenues bode well for the company.
Let’s Delve Deeper
By geographic segments, sales in the Americas rose 5% to $ 619 million, while comps increased by an equivalent rate. In the Asia-Pacific region, sales improved 13% to $ 320 million, while comps grew 3%. In Japan, the metric was up 2% to $ 189 million, while comps inched up 1%. Sales in Europe came in at $ 165 million, up 13% and comps rose 1%. Other sales came in at $ 41 million, up 48%, while comps increased 6%.
Gross margin contracted 40 basis points to 63.7% in the quarter under review. Adjusted operating margin declined 90 basis points to 23%.
In the fiscal year, this designer and retailer of fine jewelry opened nine stores and shuttered seven locations. As of Jan 31, 2018 the company operated 315 stores (124 in the Americas, 87 in Asia-Pacific, 54 in Japan, 46 in Europe, and four in the U.A.E.). Management now anticipates gross retail square footage growth of 2% on the back of nine openings, 15 relocations and two closings.
Other Financial Details
Tiffany ended the quarter with cash and cash equivalents and short-term investments of $ 1,291.2 million as well as total long-term debt of $ 882.9 million. In the quarter, the company repurchased approximately 400,000 shares at an average cost of about $ 99 per share. As of January 31, 2018, the company had $ 211 million remaining under its $ 500 million buyback program that will run through January 31, 2019.
The company generated $ 693 million of free cash flow during fiscal 2017. Management anticipates capital expenditures of $ 280 million and expects to generate free cash flow of approximately $ 380 million in the current year.
For fiscal 2018, management anticipates net earnings per share in the range of $ 4.25-$ 4.45. Net sales are projected to increase by a mid-single-digit percentage on a reported and constant-exchange-rate basis. Comps for the fiscal year are expected to rise by low-to-mid-single-digit. Operating margin is expected to decline from the prior year on account of SG&A expense growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, TIF has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Notably, TIF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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