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Tiffany & Co. (TIF) Q4 Earnings Preview: She Loves Me, She Loves Me Not

 March 21, 2013 04:54 PM

Tiffany & Co. (TIF) Tiffany will report its fourth quarter results on Friday, March 22nd.  Results will be publicly issued and e-mailed to you that morning, followed by a conference call at 8:30 a.m. (Eastern Time).

Wall Street anticipates that TIF will earn $1.36 for the quarter. iStock expects the high-end jewelry company to report earnings that will miss Wall Street's consensus number. The iEstimate is $1.34, a 2 cent downside surprise.

Tiffany and Company is a jeweler and specialty retailer, whose merchandise offerings include an extensive selection of jewelry (91% of net sales in fiscal 2011), as well as timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories.

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Interestingly, Tiffany's share price has generally followed the price of gold and hug more closely silver's price, until February 2013 when TIF diverged from the relationship. Gold and silver have turned lower while TIF shares are trading within striking distance of their 52-week high. Will Friday's earnings announcement get TIF back in line?

Newt Gingrich's favorite jewelry store has had a hard time of it as of late. Earnings have failed to hit the street's target for the last four quarters; missing by $0.14 (-22.20%), $0.01 (-1.40%), $0.05 (-7.20%) and $0.03 (-2.10%) from the most recent backwards.

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Despite missing the mark for the past year, TIF shares rallied following two of the bearish shortfalls. The stock closed at $68.68 before issuing their quarterly checkup for last year's Q4; after the news, TIF opened at $72.22 the following morning.

Three months later, Tiffany closed at $61.18 before the earnings announcement and then opened at $56.29 the next day. The stock swung back to the "she loves me" pedal following 2012's second quarter earnings, opening trading at $61.69 following the previous day's close of $58.50. And "she loves me not" was the next pluck and last quarter's reaction when TIF shares fell $5.23 from close to close.  If the daisy plucking pattern continues…

According to option volume and open interest for April calls and puts, options traders are betting on the streak of loves me, loves me not to break as today's put volume outpaces call activity by 1.8 to 1; meanwhile, open interest is running along at a very similar pace with 1.75 put options per call option.

Last quarter, weakening same store sales in Asia hurt the blue-box company. Again, we are connecting some dots here, but FedEx (FDX) reported that Asian economies are slowing. It could be a problem that resurfaces in Friday morning's announcement (BTW – we are always leery of Friday earnings announcements.)

iStock is also a little concerned with TIF's inventory increasing by 10.46% at the end of the 3rd quarter. If the jeweler had to discount dusty, high-priced merchandise to get it off the shelves, then margins could suffer, too.

Overall: Tiffany & Co. (TIF) recent history and iEstimate suggest that another earning miss could be coming, and softening Asian economies could be a drag. Based on the relationship TIF has shared with gold's and silver's price, iStock wouldn't be surprised to see the stock break its recent up and down post-EPS price pattern.



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