Will Tiffany (TIF) Manage To See Higher Earnings In Q1?

Tiffany & Co. (NYSE:TIF) is slated to report first-quarter fiscal 2018 results on May 23. In the trailing four quarters, this designer, manufacturer and retailer of jewelry and other items has outperformed the Zacks Consensus Estimate by an average of 4.5%. In the last reported quarter, the company delivered a positive earnings surprise of 2.5%.

Investors are counting on another estimate beat by Tiffany in the to-be-reported quarter. Let’s delve deep and take a look at the factors that will be influencing the results.

Here Are the Deciding Factors

Tiffany is well positioned to augment its top and bottom-lines performance in the long run by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. The company is also looking at other revenue generating avenues. It also intends to expand distribution network by adding stores in both new and existing markets. The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn boosts store productivity.

The company is gradually coming up with new jewelry designs, range of watches and fragrance. It has also introduced “build-your-own program” on its website under which customers are allowed to personalize their charm bracelets. Also, Tiffany is allowing customers to customize rings. Apart from this, the company renewed its licensing agreement with Luxottica Group — slated to expire on Dec 31, 2027 — for the development, production and global distribution of sunglasses and prescription frames.

However, despite the company’s efforts to boost the top line, rising SG&A expenses are likely to dent the operating margin. In this regard, we note that management expects fiscal 2018 SG&A expenses to increase at a rate higher than sales on account of increased spending on technology, marketing communications, visual merchandising, digital and store presentations. We noted that in the first, second, third and fourth quarter of fiscal 2017, SG&A expenses had increased 0.2%, 3.7%, 3.3% and 2.2%, respectively.

How Are Top & Bottom Line Estimates Faring?

After registering a bottom-line increase of 15% in the final quarter of fiscal 2017, Tiffany is likely to record year-over-year growth of more than 13% in the first quarter of fiscal 2018 as well. The Zacks Consensus Estimate for the quarter under review is pegged at 84 cents compared with 74 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Analysts polled by Zacks now project revenues of $960.7 million, up from $899.6 million in the year-ago quarter.

If all goes well, this will be the fourth straight quarter that the company will surpass the Zacks Consensus Estimate for both the top and bottom lines.

What Does the Zacks Model Suggest?

Our proven model does not conclusively show that Tiffany is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tiffany has a Zacks Rank #3 but an Earnings ESP of -1.66%. Consequently, making surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Best Buy (NYSE:BBY) has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco (NASDAQ:COST) has an Earnings ESP of +1.39% and a Zacks Rank #3.

Kroger (NYSE:KR) has an Earnings ESP of +3.94% and a Zacks Rank #3.

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