The Zacks Analyst Blog Highlights: Tiffany & Company, Signet Jewelers Limited, Zale Corporation, Hormel Foods Corporation and Kraft Foods

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May 27, 2011, 09:30 ET

CHICAGO, May 27, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Tiffany & Company (NYSE: TIF), Signet Jewelers Limited (NYSE: SIG), Zale Corporation (NYSE: ZLC), Hormel Foods Corporation (NYSE: HRL) and Kraft Foods Inc. (NYSE: KFT).

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Here are highlights from Thursday's Analyst Blog:

Tiffany Shines, Raises Outlook

Tiffany & Company (NYSE: TIF) posted better-than-expected first-quarter 2011 results buoyed by improved demand for luxury items worldwide and consequently raised its full year outlook. The quarterly earnings of 67 cents a share surpassed the Zacks Consensus Estimate of 57 cents, and rose substantially from 48 cents earned in the prior-year quarter.

The earnings also came well ahead of the company's previously provided guidance of 57 cents a share.

The Zacks Consensus Estimate rose by a penny over the last 30 days with only 2 out of 17 analysts covering the stock revising the estimates upward, and none lowering any projection. On a reported basis, including one-time items, quarterly earnings came in at 63 cents a share compared with 50 cents delivered in the prior-year quarter.

The shares of Tiffany rose 4.2% or $2.96 to $73.00 during pre-market trading.

Let's Dig Deep

Tiffany, which faces stiff competition from Signet Jewelers Limited (NYSE: SIG) and Zale Corporation (NYSE: ZLC), posted net sales of $761 million during the quarter, up 20% from the prior-year quarter, on the heels of stellar performance of stores in Americas, Asia-Pacific and European regions, healthy same-store sales growth and new collection launches.

Total revenue also handily beat the Zacks Consensus Estimate of $703 million. Comparable-store sales climbed 19% in the quarter under review. In constant currencies, net sales jumped 16% and comps grew 15%.

The jewelry market was hit hard by the recent global meltdown, which triggered a shift in focus to cheaper private label brands, but as the recession eased demand for luxury items also improved. Tiffany is well positioned to deliver robust sales and earnings growth. The company holds a significant position in the world jewelry market and is poised to benefit from its increased geographic reach.

By geographic segments, sales in the Americas grew 19% to $374.7 million, whereas comps rose 17% during the quarter; sales in the Asia-Pacific region surged 37% to $167.2 million and comps increased 31%; and sales in Europe climbed 25% to $85.6 million and comps rose by 20%.

Sales in Japan advanced 7% to $123.4 million, and comps grew 8%. In constant currencies sales in Japan dropped 3%. Japan delivered much better results than management had expected. Earlier, Tiffany had hinted that the catastrophe in Japan may dent its sales performance by as much as 15% during first-quarter 2011. Japan had contributed 18% to total net sales during fiscal 2010.

Other sales plunged 18% to $10.1 million, reflecting fall in the wholesale sales of rough diamonds, which were partially offset by rise in the wholesale sales of end goods to independent distributors.

Gross profit for the quarter jumped 21% to $443.7 million, whereas gross margin expanded 50 basis points to 58.3%. Operating income climbed 29% to $136 million, whereas operating margin increased 130 basis points to 17.9%.

Stores Update

With signs of improvement in the retail environment, Tiffany now plans to open 19 stores in fiscal 2011 with 7 in the Americas, 4 in Europe and 8 in the Asia-Pacific.

As of April 30, 2011, the company operated 232 stores (96 in the Americas, 55 in Japan, 52 in Asia-Pacific and 29 in Europe).

Other Financial Details

Tiffany repurchased 453,000 shares at $61.68 each, aggregating $27.9 million during the quarter.

In January 2011, Tiffany announced a new share repurchase program, overriding the previous program. The new program, which is set to expire on January 31, 2013, authorizes the company to buy back up to $400 million of shares. As of April 30, 2011, the company has $364 million at its disposal for future buy backs.

Tiffany ended the quarter with cash and cash equivalents and short-term investments of $622.3 million, and total short-term and long-term debt of $686.9 million, reflecting 30% of shareholders' equity compared with 39% in the prior year.

Management Guided

Tiffany, a high-end jewelry designer, manufacturer and retailer, raised its fiscal 2011 earnings guidance on the back of stronger-than-expected results. Tiffany forecasts earnings in the range of $3.45 to $3.55, reflecting a growth of 18% to 21%.

The current Zacks Consensus Estimate for fiscal 2011 is $3.33 per share. Following an increased outlook, a positive sentiment may be palpable among the analysts, and we could witness a rise in the Zacks Consensus Estimates in the coming days.

Earlier, management had forecast earnings in the range of $3.35 to $3.45 per share.

Tiffany now anticipates a mid-teens percentage rise in total net sales for fiscal 2011. Management expects a mid-teens percentage increase in sales in the Americas, and a mid-20s percentage rise in the Asia-Pacific and European regions. However, management forecasts sales in Japan to decline modestly. Other sales are projected to soar by 25%.

Management anticipates capital expenditures of approximately $250 million for fiscal 2011.

Currently, we have a long-term Neutral rating on the stock. Moreover, Tiffany holds a Zacks #3 Rank, which translates into a short-term Hold recommendation, and correlates with our long-term view.

Hormel Posts In-Line 2Q Results

Hormel Foods Corporation (NYSE: HRL) posted strong results for the second quarter of fiscal 2011 with an EPS of 40 cents compared with 34 cents in the corresponding period of fiscal 2010 based on a year-over-year increase of 15.3% in revenue in the second quarter.

During the quarter, Hormel reported EPS of 40 cents, up 17.6% from 34 cents in the year-ago quarter and in line with the Zacks Consensus Estimate of 40 cents. Net income reached $109.6 million up from $91.3 million in the second quarter of 2010. The increase was driven by revenue growth coupled with cost containment.

Net revenues were $1,959.0 million, up 15.3% from $1,699.8 million in the corresponding period of the previous year and $1,816 million as per the Zacks Consensus Estimate. This improvement can be ascribed to increased revenues in all the revenue segments of the company.

Revenues from Jennie-O Turkey Store spiked 25.1% and Refrigerated Foods shot up by 16.5% due to the higher demand for food products based on the gradual improvement in economic conditions. Revenues from Grocery Products grew 1.4% and Specialty Foods grew 4.1% year over year.

The Refrigerated Foods segment finished the quarter with a 26.5% increase in operating profit and Jennie-O Turkey Store witnessed a strong improvement of 45.2% in profit. Operating profit for Grocery Products rose 18.2% while Specialty Foods registered a 10.9% decline.

Selling, general and administrative (SG&A) expenses based on revenues declined by 40 basis points to reach $160.1 million.

At the end of the quarter, the company has sufficient cash and cash equivalents and marketable securities of $964.7 million, up from $598.8 million at the end of the previous quarter.

Outlook

Hormel raised its EPS guidance for fiscal 2011 and estimates it in the range of $1.67-$1.73 from $1.62-$1.68 expected earlier. Thus, the company projects a rise in its estimate from $1.51 in fiscal 2010. Input costs are expected to remain high for the fiscal year. Having a sound track record of successful acquisition and integration of businesses, Hormel is now all set to strengthen its growth profile through acquisitions. Moreover, the stock-split would definitely enhance shareholders' confidence.

The company faces stiff competition from Kraft Foods Inc. (NYSE: KFT). We currently maintain a Neutral recommendation on the stock.

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