Why Tiffany Stock Rose despite Soft Near-Term Outlook

Management expects earnings to improve in H2 2019

Tiffany (TIF) posted mixed fourth-quarter results (for the fiscal period ended January 31) on March 22. The company’s top line missed analysts’ estimate and fell on a year-over-year basis. Meanwhile, earnings beat analysts’ expectations, thanks to tax adjustments.

Management expects sales and earnings to remain under pressure in the near term. However, Tiffany’s stock closed 3.2% higher despite the sales miss and weak short-term outlook as Tiffany’s bottom line is projected to stabilize in the back half of fiscal 2019, which is likely to drive high-single-digit growth in Tiffany’s full-year EPS.

Why Tiffany Stock Rose despite Soft Near-Term Outlook

Tiffany’s top line is expected to take a hit from lower tourist spending in the first half of fiscal 2019. Meanwhile, a strengthening US dollar and tough year-over-year comparison are expected to pressure the top line even more. Soft sales and investments in growth measures are likely to hurt margins and, in turn, EPS.

In comparison, rival Signet Jewelers (SIG) is also expected to post weak fourth-quarter results. Signet’s top line is projected to take a hit from competitive promotional spending and a high cost of credit. Meanwhile, weak sales are likely to take a toll on earnings.

Tiffany stock recorded solid gains

Tiffany shares are up 28.2% year-to-date as of March 22 and have outperformed the broader markets. In comparison, Signet Jewelers stock is down 16.7%. Meanwhile, the S&P 500 is up 11.7%.