What Will Tiffany & Co. Do After Its Recent Earnings Release?

With shares of Tiffany & Co. (NYSE:TIF) trading around $80, is TIF an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Tiffany & Co. engages in the design, manufacture, and retail of jewelry worldwide. The company operates through the Americas, Asia-Pacific, Japan, Europe, and other segments. Its jewelry products include fine and solitaire jewelry; diamond engagement rings and wedding bands for brides and grooms; and non-gemstone, sterling silver, gold, metal, and platinum jewelry. Tiffany & Co. also sells timepieces, leather goods, sterling silver goods, china, crystal, stationery, fragrances, and accessories. The products sold by Tiffany & Co. are seeing increased demand as consumers around the world look to distinguish themselves from others. Jewelry and designer products give many consumers a sense of satisfaction and happiness that may be everlasting.

Tiffany & Co. reported better-than-expected earnings this morning, causing the stock to rise 2 percent in premarket trading. Strong sales in China and lower prices for gold and diamonds helped the jeweler beat analyst forecasts and raise its full-year outlook. The company also said that its price increases didn’t deter customers.

T = Technicals on the Stock Chart are Strong

Tiffany & Co. stock has been exploding higher this year. The stock is now consolidating below all-time high prices and may need to spend some time here. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Tiffany & Co. is trading above its rising key averages which signal neutral to bullish price action in the near-term.

TIF

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Tiffany & Co. options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Tiffany & Co. Options

25.30%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Tiffany & Co.’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Tiffany & Co. look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

15.28%

9.37%

0.98%

-30.00%

Revenue Growth (Y-O-Y)

4.45%

9.32%

4.07%

3.77%

Earnings Reaction

-2.27%*

3.94%

1.94%

-6.16%

Tiffany & Co. has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings with Tiffany & Co.’s recent earnings announcements.

*As of this writing

P = Excellent Relative Performance Versus Peers and Sector

How has Tiffany & Co. stock done relative to its peers Zale (NYSE:ZLC), Blue Nile (NASDAQ:NILE), LJ International (NASDAQ:JADE), and sector?

Tiffany & Co.

Zale

Blue Nile

LJ International

Sector

Year-to-Date Return

40.37%

115.30%

-4.34%

11.11%

33.76%

Tiffany & Co. has been a relative performance leader, year-to-date.

Conclusion

Tiffany & Co. provides valuable and highly demand jewelry and related products to a large group of consumers around the world. The company recently released an earnings report that surpassed Wall Street’s expectations. The stock has been moving higher and is now consolidating slightly below all-time high prices. Over the last four quarters, earnings and revenues have been rising, however, investors have had mixed feelings about the company. Relative to its peers and sector, Tiffany & Co. has been a year-to-date performance leader. WAIT AND SEE what Tiffany & Co. does this coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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