Zacks Analyst Blog Highlights: Tiffany & Company, Signet Jewelers, Zale, BP Plc and Buckeye Partners

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Mar 22, 2011, 09:30 ET

CHICAGO, March 22, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Tiffany & Company (NYSE: TIF), Signet Jewelers Limited (NYSE: SIG), Zale Corporation (NYSE: ZLC), BP Plc (NYSE: BP) and Buckeye Partners L.P. (NYSE: BPL).

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Here are highlights from Monday's Analyst Blog:

Tiffany Shines, Japan Dims Outlook

Tiffany & Company (NYSE: TIF) posted better-than-expected fourth-quarter 2010 results buoyed by improved demand for luxury items worldwide. The quarterly earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.39, and rose substantially from $1.09 earned in the prior-year quarter.

The Zacks Consensus Estimate rose by a penny over the last 30 days with only one out of 15 analysts covering the stock revising the estimate upward. On a reported basis, including one-time items, quarterly earnings came in at $1.41 per share compared with $1.09 delivered in the prior-year quarter.

Behind the Headline

Tiffany, which faces stiff competition from Signet Jewelers Limited (NYSE: SIG) and Zale Corporation (NYSE: ZLC), posted net sales of $1,101.2 million during the quarter, up 12% from the prior-year quarter, on the heels of stellar performance of new stores opened in Americas, Asia-Pacific and European regions, healthy same-store sales growth and new collection launches.

Total revenue also surpassed the Zacks Consensus Revenue Estimate of $1,092 million. Comparable-store sales climbed 11% in the quarter under review. In constant currencies net sales jumped 11% and comps grew 9%.

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. However, the recent catastrophe in Japan may dent its performance to some extent, which contributed 18% to total net sales during fiscal 2010.

By geographic segment, sales in the Americas grew 10% to $577.1 million, whereas comps rose 8% during the quarter; sales in the Asia-Pacific region surged 25% to $188.3 million and comps increased 21%; and sales in Europe climbed 14% to $137.9 million and comps rose by 9%. Sales in Japan advanced 11% to $182.6 million, and comps grew by 10%. Other sales plunged 30% to $15.3 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 16.5% to $671 million, whereas gross margin expanded 220 basis points to 60.9%. Operating income climbed 23.9% to $278.2 million, whereas operating margin increased 240 basis points to 25.3%.

Tiffany now anticipates total net sales for fiscal 2011 to rise between 12% and 14%. Management now expects a low-double digit percentage increase in sales in the Americas, at least 20% rise in the Asia-Pacific region and a more than 20% growth in Europe but a mid-single digit percentage sales decrease in Japan.

For fiscal 2011, Tiffany forecasts earnings in the range of $3.35 to $3.45, reflecting a growth of 14% to 18%. The current Zacks Consensus Estimate for first quarter is 55 cents and for fiscal 2011 is $3.22 per share.

Management anticipates capital expenditures in the range of $250 million to $275 million for fiscal 2011

Currently, we have a long-term "Outperform" rating on the stock. However, we remain concerned about Tiffany's operations in Japan, which were recently hit by the earthquake and tsunami. Consequently, the stock holds a Zacks #3 Rank, which translates into a short-term 'Hold' rating.

BP Trims Assets, Gains $225M

BP Plc (NYSE: BP) plans to divest its refined petroleum products' terminals as well as pipelines in the U.S. to Buckeye Partners L.P. (NYSE: BPL), the country's leading petroleum distributor. The transaction is worth $225 million and is expected to close in the second quarter of 2011, subject to regulatory approvals and other customary conditions.

The agreement comprises 33 refined products terminals and 992 miles of pipelines across 13 states in Midwestern, Southeastern, and Western United States. The terminal has a total storage capacity of more than 10 million barrels. The pipeline assets include BP's 50% stake in Inland Corporation, representing $60 million of the selling price. Inland Corporation is a joint venture between BP Oil Pipeline Company, Shell Oil Company, Sun Pipeline Company and Midwest Pipeline Holding, LLC.

Over the past one year, BP has been signing major agreements to raise money for spill-related assignments. The Gulf of Mexico (GoM) oil spill cost the company nearly $41 billion. For the British oil major, divestment of non-core assets has become a drill to streamline its downstream operations and raise money to clear the spill-related charges.

The company has already sold approximately $22 billion of assets and is well on track to complete its $30 billion divestiture program by the end of 2011. Management remains positive on the company's growth profile and looks forward to a marked recovery as well as reduction in operational risks.

We see a slow but gradual economic recovery, deeper focus on upstream exposures and increases in oil prices as beneficial for BP.

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