On Tuesday November 26, shares of Tiffany (TIF) roared higher in the intra-day trading session (rising 8.68%) after the retailer saw margins expand significantly during Q3 as increasing high-end jewelry prices coincided with lower product costs.
One of the key catalysts driving margins higher was significant growth in Asia which dwarfed the company's mild gains in both the U.S. and Europe. In the wake of the company's news, I wanted to highlight a number of reasons why I'm staying bullish on shares of Tiffany & Co.
Recent Performance & Trend Status
On Tuesday, shares of TIF, which currently possess a market cap of $11.25 billion, a forward P/E ratio of 21.43, and a dividend yield of 1.55% ($1.36), settled at a price of $88.02/share.
Based on their closing price of $88.02/share, shares of TIF are trading 8.49% above their 20-day simple moving average, 11.41% above their 50-day simple moving average, and 16.81% above their 200-day simple moving average. These numbers indicate a short-term, mid-term, and long-term uptrend for the stock which generally translates into a moderate buying mode for both near-term traders and most long-term investors.
Recapping A Strong Q3 For Tiffany & Co.
On Tuesday, November 26, Tiffany & Co. reported EPS of $0.73/share and revenue of $911 million for the third quarter. These results had surpassed both analysts' EPS estimates by a margin of $0.15/share and revenue estimates by a margin of $21.49 million. Some of the more positive notes to come out of the company's earnings announcement included but were not limited to a 27% increase in total sales within the Asia-Pacific region as well as the opening of six additional locations around the world.
In should also be noted that the company's cash and cash equivalents as well as its gross margins demonstrated strong growth during the third quarter. Cash and cash equivalents were $521 million at October 31, 2013, compared with $345 million a year ago. Total short-term and long-term debt as a percentage of stockholders' equity was 36% at October 31, 2013, versus 40% a year ago. Gross margin (gross profit as a percentage of net sales) in the third quarter increased 2.6 points to 57.0%, from 54.4% a year ago, and in the year-to-date rose 0.9 point to 56.9% compared with 56.0% in the prior-year period.
5-Year Dividend Growth
Since September 18, 2008, the company has increased its quarterly distribution six times over the last 60 months (representing an average increase of 20% over the last five years), with the most recent increase having taken place in June of this year.
The company's forward yield of 1.55% ($1.36) coupled with its ability to continuously increase its distribution over the last several years, make this particular luxury retailer a highly considerable option, especially for those who may be in the market for a sustainable stream of conservative dividend income.
Income-driven investors should note that Tiffany & Co. will pay its next quarterly dividend of $0.34/share on Friday, January 10, which will be for those shareholders who were on record as of December 20.
According to Tiffany & Co.'s most recent 10-K, there are a number of risk factors all investors should consider. These factors include but are not limited to the fact that regional instability and conflict could disrupt tourist travel and local consumer spending, the fact that volatile global economic conditions may have a material adverse effect on the company's liquidity and capital resources, and the fact that changes in costs of diamonds and precious metals or reduced supply availability may adversely affect the company's ability to produce and sell products at desired profit margins.
For those of you who may be considering a position in Tiffany & Co., I'd keep a watchful eye on a number of catalysts over the next 12-24 months as each could play a role in the company's long-term growth. For example, near-term investors should focus on the company's recent performance and trend behavior, while long-term investors should continue focus on the company's dividend behavior as well as its ability to maintain or even its margins over the next year or two.