CHICAGO, June 3, 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: Wal-Mart (NYSE: WMT), Family Dollar (NYSE: FDO), Tiffany & Company (NYSE: TIF), Signet Jewelers Limited (NYSE: SIG) and Zale Corporation (NYSE: ZLC).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Thursday's Analyst Blog:
Initial Jobless Claims Down Slightly
Initial Claims for Unemployment Insurance fell by 6,000 last week to 422,000. This was worse than the expected level of 413,000. The trend in initial claims had been moving downward, although with some bumps along the way. Last month, they have started to shoot back up again.
This is a very worrisome trend, though we will need a few more weeks of declines to really be sure the trend is still in the right direction. Let us hope the decline continues next week.
There have been several indicators lately that the recovery is losing steam, and while the direction this week was right, the level is not that encouraging. This is the 8th straight week we have been above the 400,000 level. Being below it as we were in March probably signaled the start of much more robust job growth. Now it looks like we are back to the "trading range" that initial claims were in for almost all of 2010. Initial claims had been generally trending down since they hit a secondary peak of 504,000 (after revisions) on 8/14.
Track the 4-Week Moving Average
Since claims can be volatile from week to week, it is better to track the four-week moving average to get a better sense of the trend. Unfortunately, smoothing it out this way does not make the picture that much more appealing. It fell by 14,000 to 425,500.
The four-week average staying the psychologically important 400,000 level, is a very bad sign. As far as the domestic economy is concerned, robust job creation has been the last big part of the puzzle to fall into place. It looks like the combined pressures from government budget cuts, the disaster in Japan and the increased oil prices are taking their toll.
Things had been starting to look better on the jobs front, but the initial claims numbers of the last two months are a bit of a wet blanket. Still, relative to a year ago, the four-week average is down by 39,750 or 8.6%.
Progress Rapidly Slowing
Yesterday's ADP numbers seem to indicate that the slow progress we have been making on the jobs front has almost stopped. The recent trend in initial claims also suggests that that progress is rapidly slowing.
The April employment report was encouraging, but we still have a very long way to go. We added a total of 244,000 jobs, according to the establishment survey, as the private sector total of 268,000 was offset by the loss of 24,000 jobs in state and local government.
The unemployment rate rose to 9.0% from 8.8%, as the separate household survey was significantly weaker than the establishment survey. It was not due to more discouraged workers getting back into the labor force, something that has been erroneously stated over and over in the news media.
Looking Toward Friday's Numbers
The civilian participation rate has been stuck at 64.2% since January. February and March both had net positive revisions, with private sectors jobs revised up. Tomorrow we get the official May numbers.
Before the ADP data was released, the consensus was looking for a total of 185,000 net jobs being added in May, with 220,000 coming from the private side, offset by the loss of 35,000 government jobs. After the ADP numbers, those projections make Pollyanna look like a pessimist.
Better, Still Bad
While the employment picture has improved a bit this year, in any absolute sense it is still just plain awful. The pace of improvement appears to be slowing significantly based on the initial claims data over the last few weeks. I find it astounding that aside from making political points, nobody in Washington seems to care anymore.
The one exception is the Federal Reserve, which is doing its part by keeping rates low and by using quantitative easing. While that helps a little bit, it is also much less effective than fiscal stimulus would be. Right now monetary policy is sort of "pushing on a string." In any case, QE2 is going to end in June, and the likelihood of it being followed by QE3 is very low right now.
Some claim that the long duration of unemployment benefits has actually discouraged people from looking for work. That is, people are content to live forever on 60% of their previous income, or $400 per week, whichever is lower. The average benefit is only about $300 a week. Ask yourself how well could you live on $300 per week.
Right now (well as of the March JOLTS data) there are almost 4.3 people out of work for each job opening. Just telling all of them to "get a job" isn't going to work. The extension of benefits is one of the key reasons that initial claims are falling. While that may sound counter-intuitive, it is because extended benefits are a very effective form of economic stimulus.
The graph below shows the ratio of jobless to job openings since the JOLTS data first started tracking job openings. As with so many other things, we are making progress and headed in the right direction, but the absolute level is still awful.
Extended unemployment benefits are, dollar of dollar, one of the most effective forms of economic stimulus there is. It is a pretty good bet that the people losing their extended benefits have depleted their savings and run up all the debt they can in trying to make ends meet. The maximum unemployment benefit works out to be just $20,800 per year, or less than the poverty line for a family of four. You think any of those people have been able to sock any of that away?
There is a concern that by cushioning the blow of unemployment, people might be more reluctant to take a marginal job opportunity, but a below poverty level income is not that much of a cushion. I'm not sure it is good for the economy for highly skilled people to be taking jobs in other fields that have no use of those skills, and then be unavailable when those skills are needed again.
The people who get extended benefits tend to spend the money quickly on basic needs. This in turn keeps customers coming in the door at Wal-Mart (NYSE: WMT) and Family Dollar (NYSE: FDO). It means that, at the margin, some people are able to continue to pay their mortgages and thus helps keep the foreclosure crisis from getting even worse than it already is.
Earnings Scorecard: Tiffany & Co.
Tiffany & Company (NYSE: TIF), a high-end jewelry designer, manufacturer and retailer, recently posted first-quarter 2011 results.
Street analysts had nearly a week to ponder on the news. In the subsequent paragraphs, we cover the recent earnings announcement, analysts' estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Earnings Report Review
Tiffany's quarterly earnings of 67 cents per 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 previous guidance of 57 cents a share.
Tiffany, which faces stiff competition from Signet Jewelers Limited (NYSE: SIG) and Zale Corporation (NYSE: ZLC), posted net sales of $761.0 million during the quarter, up 20.0% from the prior-year quarter, on the back 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 beats 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%.
Tiffany 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%.
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%.
Agreement of Estimate Revisions
Clearly, a positive sentiment is palpable among analysts, following the earnings release. In the last 7 days, 11 out of the 16 analysts covering the stock increased their estimates with only one lowering the estimate for second-quarter 2011. For third-quarter 2011, 9 analysts revised their estimates in the upward direction, while one analyst chopped the estimate in the last 7 days.
For fiscal 2011 and 2012, 15 and 9 analysts, respectively, have increased their estimates in the last 7 days, with only 1 analyst lowering the projection for fiscal 2012.
Our View
We believe Tiffany is well positioned to support robust sales and earnings growth by leveraging capital investments made over the past several years in distribution, manufacturing and diamond sourcing processes. Moreover, with nearly half of the total sales generated internationally, we believe that the company is well diversified from a regional perspective.
Further, Tiffany has been consistently enhancing shareholders' return through share repurchases and dividends. The company recently increased its quarterly dividend by 16%. This is the ninth time the company has hiked its dividend in the last nine years. In January 2011, the company announced a new share repurchase program of $400 million, which is set to expire on January 31, 2013.
The company is focused on opening smaller stores that offer selected collections of lower priced higher-margin product, which in turn, boosts store productivity. Tiffany concentrates on improving sales per square foot through an increase in customer traffic and converting them into potential buyers by targeted advertising, ongoing sales training and customer-oriented initiatives.
Currently, we have a long-term "Outperform" rating on the stock. However, Tiffany holds a Zacks #2 Rank, which translates into a short-term 'Buy' rating.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com
SOURCE Zacks Investment Research, Inc.
Share this article