Tiffany & Co. - Growth & Income

Tiffany & Co. (TIF) is seeing strong momentum heading into the all-important holiday shopping season. The company recently reported excellent third quarter results as same-store sales jumped 7%.

This marked the company's third consecutive positive earnings surprise, prompting management to raise guidance for the remainder of the year. It looks as though the high-end consumer is spending again.

Third Quarter Results

Tiffany & Co. reported its results for the third quarter of 2010 on November 24. Earnings per share came in at 46 cents, beating the Zacks Consensus Estimate by 28%. It was an impressive 43% increase over the same quarter in 2009.

Net sales were up 12% year-over-year as growth was strong in each region. Same-store sales improved a stellar 7%.

Somewhat surprisingly, Europe was the strongest region. Sales rose 29% on same-store sales growth of 24%. The Asia-Pacific market was also very solid. Sales were up 20% on an 11% increase in same-store sales.

The overall gross margin expanded from 54.8% to 58.5% due to price increases and sales leverage on fixed expenses. Meanwhile, income from continuing operations surged 46%.

Raising Guidance

Tiffany & Co. is experiencing solid momentum heading into the all-important holiday shopping season. Management raised its outlook following the strong third quarter and now expects 2010 EPS between $2.72 and $2.77, up from previous guidance of $2.60 to $2.65.

Analysts revised their estimates higher, too. The Zacks Consensus Estimate for 2010 is within management's range at $2.75. This equates to 35% EPS growth over 2009. The 2011 estimate is currently $3.14, representing 14% growth.

It is a Zacks #2 Rank (Buy) stock.

Rewarding Shareholders

Tiffany & Co. has been generously raising its dividend over the last several years. Since 2000, it has increased it at a compound annual growth rate of 20.1%. It currently yields 1.6%.

The company also spent approximately $25.7 million in the quarter repurchasing approximately 588,000 shares.

Valuation

Shares are trading at 23.0x forward estimates, a premium to the industry average of 17.4x. Its PEG ratio is a reasonable 1.5.

Tiffany & Co. is headquartered in New York, New York and has a market cap of $8.0 billion. As of October 31, 2010, it operated 225 jewelry and specialty retail stores worldwide.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
TIFFANY & CO (TIF): Free Stock Analysis Report
 
Zacks Investment Research