Tickers in this Article: TIF, ZLC, TAHEF
There's bad news and good news at jeweler Tiffany & Co. (NYSE:TIF). First the bad news: Fourth quarter earnings declined 16%, due to charges from Tahera Diamond Corporation (OTC:TAHEF) and the company's Iridesse unit. Overall fourth quarter profits declined to $118.3 million (89 cents a share) from the previous years quarter of $140.5 million ($1.02 per share).

The good news: Once the quarter's blunders are removed, earnings surged 19%, and for the full year, net profits climbed 22%. However the real "gem" of the report was the 2008 earnings outlook, which certainly sparkled by most accounts. All of the optimism triggered a surprising run in the stock on Monday, with shares up over 10%, at last glance.

Polished Guidance
In the company's earnings report, Tiffany CEO and Chairman Michael J. Kowalski stated, " In 2008, we expect to see robust growth in our non-U.S. markets other than Japan and are experiencing such performance in the quarter-to-date. We remain cautious about the U.S., although comparable store sales are currently increasing slightly." Once you decode this statement you realize he's saying what so many in America already know: The economy is in the tank and consumer spending in the U.S. could remain slow. However, on a global scale, Kowalski's comments had a much different tone.

Kowalski said, "Overall, our worldwide sales have increased in excess of 10% in the quarter-to-date. For the full year, our plan calls for: (i) net sales growth of approximately 10%, including comparable store sales increasing by low-single-digits in the U.S. and mid-single-digits internationally..."

Looking forward, the company expects to earn $2.75-2.85 per share for 2008, a significant surge above Wall Street's previous estimate of $2.49 per share. (For more information, read Earnings Forecasts: A Primer.)

For the year, shares were down about 17%, though on Monday that performance figure had recovered to just under 8%. What's more, while we don't covet technical analysis, it is important to note that shares are now trading above the 50-displaced moving average (DMA) and look as if they are on their way back up to the 200-DMA at $46.44. (For further reading, check out Blending Technical And Fundamental Analysis and our tutorial Basics of Technical Analysis.)

Fundamentals Still Strong
At present, Tiffany is trading with an optimistic/in line forward PE of 17.5, while the PEG sits at 1.3. These numbers are healthy, as they show the stock is not overbought at present levels and leave room for share price appreciation in the quarters to come. What's more, considering the industry average PE is around 34, shares could actually double from here, before hitting the sector mean. That's not to say that the shares will double, but there is room for upside. (To learn how to make an informed decision about your investments, read Analyze Investments Quickly With Ratios.)

Shares of competitor Zale Corporation (NYSE:ZLC) have been on a torrid upward run during the year, moving from the low of around $13 a share to the present $22. However, Zale is trading with a PE of 35, something investors should be aware of. While Zale could see more upside, investors who prefer not to chase stocks might be better off taking positions in Tiffany

Bottom Line
Overall, Tiffany looks great in the recent earnings announcement, even if the company has had to deal with some bad debt. In addition, it is important to remember that Tiffany is fairly recession-resistant, as most people who buy from the company have tons of excess cash for discretionary spending, regardless of subprime and economic woes.

Investors certainly aren't guaranteed a free ride to gains in Tiffany, but as of now, things look good.

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