Options Trade – Tiffany & Co. (NYSE:TIF) Calls
Sunday, March 16, 2014

**OPTIONS TRADE: Buy the TIF May 2014 90.000 call (TIF140517C00090000) at or under $4.80, good for the day. Place a protective stop limit at $1.90 and a pre-determined sell at $8.00.

by Ian Harvey

March 16, 2014

Introduction

Tiffany & Co. (NYSE: TIF), an upscale jewelry retailer, is scheduled to release its fourth quarter results before the market opens March 21. Analysts have forecast earnings of $1.52 per share for the quarter. The stock traded lower during January with the broad market and while it regained strength when the market rebounded in February, shares remain down 0.3% on the year.

The consensus estimate for the quarter is $1.52, but the rumored number that analysts really expect is slightly higher, at $1.58, so that is the number we really need to see for the report to be considered a success. Tiffany is a strong brand name, which enables to the company to command higher prices than some of its competitors. This helped the company enjoy a 7% jump in revenues last quarter, and 50% earnings growth. When discussing retailers, analysts always pay special attention to same store sales, which were up 7% last quarter, a good sign for the business. Tiffany's holiday sales results showed a 4% increase during the last two months of the year, and a 6% increase in the Americas.

Company Details

Tiffany & Co. (Tiffany) is a holding company that operates through its subsidiary companies. The Company operates in five segments: Americas, Asia-Pacific, Japan, Europe and other.

The Company’s principal product category is jewelry, which represented 90% of worldwide net sales during the fiscal year ended January 31, 2013 (fiscal 2012).

The Company offers a selection of TIFFANY & CO. brand jewelry. The Company also sells timepieces, leather goods, sterling silver goods (other than jewelry), china, crystal, stationery, fragrances and accessories, which represented, in total, 8% of worldwide net sales in 2012.

The Company operates e-commerce enabled Websites in 13 countries. The Company produces jewelry in New York, Rhode Island and Kentucky, and silver hollowware in New Jersey.

Key Statistics for TIF

Current P/E Ratio (ttm) 25.1434
Estimated P/E(01/2014) 24.4155
Relative P/E vs. SPX 1.4833
Earnings Per Share (USD) (ttm) 3.6550
Est. EPS (USD) (01/2014) 3.7640
Est. PEG Ratio 1.6985
Market Cap (M USD) 11,767.64
Shares Outstanding (M) 128.05
30 Day Average Volume 1,143,108
Price/Book (mrq) 4.1700
Price/Sale (ttm) 2.9513
Dividend Indicated Gross Yield 1.48%
Cash Dividend (USD) 0.3400
Dividend Ex-Date 03/18/2014
5 Year Dividend Growth 15.22%
Next Earnings Announcement 03/21/2014

Technical Analysis

Tiffany & Co. has a one year low of $67.75 and a one year high of $94.88. The stock’s 50-day moving average is $87.8 and its 200-day moving average is $83.93.

The company has a market cap of $11.955 billion and a price-to-earnings ratio of 26.01.

Technical indicators for TIF are bullish and the stock is in a strong upward trend. The stock has support above $90.10 and resistance below $94.90.

Earnings

Tiffany & Co. (NYSE:TIF) last announced its earnings results on Tuesday, November 26th. The company reported $0.73 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.58 by $0.15. The company had revenue of $911.00 million for the quarter, compared to the consensus estimate of $889.51 million.

During the same quarter in the prior year, the company posted $0.49 earnings per share. The company’s quarterly revenue was up 6.9% on a year-over-year basis. Analysts expect that Tiffany & Co. will post $3.77 EPS for the current fiscal year.

Analysts Opinions

Tiffany & Co. was upgraded by equities researchers at Citigroup Inc. from a “neutral” rating to a “buy” rating in a research report issued on Thursday, TheFlyOnTheWall.com reports. The firm currently has a $110.00 price objective on the stock, up from their previous price objective of $100.00. Citigroup Inc.’s price target would indicate a potential upside of 17.26% from the stock’s previous close.

The analysts wrote, “We also expect the stock to go higher given lower product costs and stabilizing trends in silver fashion jewelry driving continued gross margin upside. Positive wealth effect (given S&P +30 percent in 2013) and improved macros should help drive consumer spending”. Chen continued, “We like the momentum in Tiffany’s fashion jewelry segment (~30+% of mix) which is key to both North American comp recovery & also beneficial to gross margin improvement.” Turning to long-term, Chen sees Tiffany as “structurally healthy.”

Also, the company has been the subject of a number of research reports:-

• Analysts at EVA Dimensions upgraded shares of Tiffany & Co. from a “sell” rating to an “underweight” rating in a research note on Wednesday, March 5th.

• Separately, analysts at Nomura initiated coverage on shares of Tiffany & Co. in a research note on Wednesday, February 12th. They set a “buy” rating and a $100.00 price target on the stock.

• Finally, analysts at Zacks reiterated an “outperform” rating on shares of Tiffany & Co. in a research note on Friday, January 17th. They now have a $97.00 price target on the stock.

One equities research analyst has rated the stock with a sell rating, eight have issued a hold rating, eleven have issued a buy rating and one has given a strong buy rating to the company’s stock. Tiffany & Co. currently has an average rating of “Buy” and a consensus target price of $88.31.

Conclusion

It is believed that the solid holiday sales will result in a good earnings report, which should help push the stock higher.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the TIF May 2014 90.000 call (TIF140517C00090000) at or under $4.80, good for the day. Place a protective stop limit at $1.90 and a pre-determined sell at $8.00.



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