Bull of the Day: Tiffany & Co (TIF) - Bull of the Day

By Zacks | July 28, 2014 AAA

2014 has been an interesting year for retailers to say the least. Several clothing stores have had horrendous first half results as changing tastes have hit many companies hard. Meanwhile, in the restaurant side of the retail space, a similar trend has taken place as ‘higher quality’ companies are leaving their value-oriented counterparts in the dust.

This trend of high end outperforming lower end or value in the retail world is one of the bigger stories in this sector so far this year. And for a classic stock example of this that may still have more room to run as we close out the year, investors have to look no further than Tiffany & Co (TIF).

TIF in Focus

Tiffany & Co is a New York City-based jewelry retailer, specializing in fine and solitary jewelry, though the company also sells watches, perfumes, and accessories as well. The company is obviously operating in the high end corner of the market, and like many of its high end peers across the retail world (no matter the industry), it is really turning up the heat as of late in terms of stock price appreciation, including a 20% move higher in the past six months alone.

A big reason for this jump is the recent earnings picture for the company, and TIF’s beats at earnings season. TIF posted EPS of 97 cents, easily crushing the consensus estimate of 77 cents a share.

The beat was thanks to strong sales, which were up 13% from the year ago quarter, while comparable-store sales also saw a double digit increase as well. And perhaps the best news from the sales beat was the strength across geographic divisions, as Asia-Pacific saw 17% growth, while Japan saw 20% growth, showcasing the strong demand for TIF products across global markets.

Earnings Outlook

Given the strong trend in the luxury and high end corners of the retail world, and TIF’s continued dominance of the space, it shouldn’t be too surprising to note that earnings estimates have been rising for Tiffany stock.

Estimates have risen for both the current year and the next year time frames, with not a single estimate going lower for either period. Now, TIF is projected to see double digit EPS growth for both this year and next, suggesting a strong, durable trend for the company.

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And though higher expectations can be difficult to match, investors should take comfort in TIF’s recent history at earnings season. The company has beaten estimates in three of the last four reports, with an average surprise of roughly 15%, so raised expectations shouldn’t be too hard to hit this time around either.

Thanks to these factors, TIF has earned itself a Zacks Rank #1 (Strong Buy). This means that we are looking for more outperformance in the months ahead, and that we expect the positive momentum in TIF shares to continue into the fall.

Bottom Line

Not only is TIF in a great position, but there is strength in the industry too. In fact, the retail-jewelry industry is ranked in the top 2% of all industries (at time of writing), so investors can rest assured that a rising tide is lifting all boats in this space.

But while this industry is looking solid overall, TIF is really the pick that is shining bright. The company has seen solid sales growth and earnings beats, while it remains well-positioned to take advantage of the focus on high end retailers and the great trends that are underpinning the space.

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