Stock of the day 26/08/2015 – Tiffany & Co

Even before the recent price plunge felt around the globe it had been a tough year for Tiffany & Co; how will it fare with its second quarter results on Thursday?

The jewellery company didn’t waste any time in getting off to a bad start in 2015, despite having hit fresh all-time highs the previous November. In the middle of January the stock dropped 14% from $93 to $89 following its dismal 2014 holiday sales statement; Japan and the Middle East were the main sources of woe, though US shoppers weren’t much better, causing a 1% decline in Christmas revenue to $1.02 billion.

Following that blow Tiffany struggled to break the $90 mark for the following few months, sinking as low as $82 on the eve of its fourth quarter results towards the end of March. Those results created a moment of respite for the company, as it beat expectations to post a net income of $196.2 million, equating to $1.51 per share compared to the $1.50 forecast; revenue was a mild miss, at $1.29 billion against the $1.3 billion expected, but couldn’t prevent investors from lifting the stock away from its then-13 month lows in the aftermath.


(Source: IT-Finance.com 26/08/2015)

This rise saw Tiffany approach $90 towards the middle of April, only to fall back into its familiar $84 to $88 trading bracket. The company remained in this bracket until its first quarter report at the end of May, which showed the situation at Tiffany wasn’t as bad as first though. Whilst revenue slipped by 5% year-on-year to $962.4 million, this is half of the 10% decline that the company had first warned investors of in March, with same-store sales only down 1% against the 4.6% forecast. Part of the reason for this improvement was Tiffany’s success at selling its most expensive jewellery, something that helped compensate for softening sales and the pesky strong dollar.

These results saw Tiffany hit its highest price since the post-holiday season haemorrhaging in January, surging 10.5% to reach $94.50. Tiffany managed to linger near this price across June and July, before briefly ascending to $96 at the start of August. However, the China-inspired market-wide tumbles of the past fortnight wiped out all of Tiffany’s post-first quarter gains, sending the stock to a near 18 month low of $81.88 (IT-Finance.com, 26/08/2015).

Things don’t look like they will get any better following the company’s second quarter results. Analysts are expecting a 6.6% drop in pre-tax profits to $179.6 million, with a dip in revenue from $1 billion to $992.9 million year-on-year. The stronger dollar hurting US tourist sales, and continued weakness in Japan and Hong Kong, have been pointed to as the causes of this decline, and could prompt the stock to hit a new 2015 nadir.

However, due to the current cheapness of the stock, analysts are still bullish on Tiffany & Co, giving it a consensus rating of ‘Buy’ and an average target price of $102.78.