Nomura Previews Tiffany's Q1 Earnings: 'The Value Shines Through'

Nomura expects above-consensus earnings from Tiffany & Co. TIF when the jewelry maker reports its first-quarter results on May 25.

Q1 Expectations

Nomura sees first quarter EPS of $0.70, $0.02 above consensus and expects worldwide comps in the quarter to decline 5 percent (CC), including an 8 percent fall in the Americas.

"While we are optimistic about TIF's efforts to improve its positioning with the domestic consumer, we think that materialization will take some time and that pressure from reduced tourism will continue," analyst Robert Drbul wrote in a note.

In addition, the analyst projects a 9 percent comp decline in Europe as the current instability reduced tourism in the region. Drbul anticipates a 7 percent comp decline in APAC, as HK remains weak, but expects Japan to remain strong and estimate a 15 percent comp.

"While top-line challenges persist, we are encouraged by the GM opportunity and forecast 40bps of expansion in 1Q16, driven by favorable product input cost (partic. metal), price increases, and manufacturing initiatives," the analyst noted.

Related Link: Tiffany's CFO Resigns Following Career Trend Of Working Short Tenures

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Drbul expects FY16 EPS at $3.80 and FY17 EPS at $4.15, while projecting about 25bps of gross margin expansion for FY16.

"We remain optimistic about a turnaround at TIF and believe that, at current levels, the shares offer an attractive risk/reward ratio. On 4/13, we attended Tiffany's Investor Day in NYC and deem the company's stated financial targets both realistic and achievable," Drbul highlighted.

Commenting on the departure of CFO Ralph Nicoletti, the analyst termed it as "untimely," but remains confident in the current executive team.

Shares of Tiffany were up 0.28 percent to $64.11 at time of writing. The analyst has a Buy rating and $90 price target on the stock.