NEW YORK (TheStreet) - Tiffany (TIF) - Get Report shares were rising 1% to $101.81 on Wednesday after the luxury-jewelry retailer surprised Wall Street by beating earnings expectations by 9 cents a share, fueled in large part by sales growth in the U.S. and gross margin expansion of approximately 240 basis points, to 59.9%.

For the second quarter, Tiffany reported net income of $124 million, or 96 cents a share, compared with $107 million, or 83 cents a share in the year-earlier period. Consensus estimates were calling for earnings of 85 cents a share for the July 31-ending period.

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Net sales across all its regions rose 7% to $993 million, higher than estimates of $987.8 million. Worldwide comparable sales rose 3% fueled by an 8% comp in the U.S. (compared to 5.8% expected by analysts) and 7% in Asia-Pacific. Still comps in Japan slumped 13% for the quarter while European comparable sales fell 8% in the period.

Tiffany upped its full-year EPS forecast range by 5 cents to a range of $4.20 to $4.30 a share, up from its previous guidance of $4.15-$4.25.

Here's what analysts are saying about Tiffany's earnings:

Francesca Di Pasquantonio, Deutsche Bank (Hold; $100 PT)

The key highlight of the results is the strength of the US comps which indicates that the backdrop remains favourable and that TIF self-driven initiatives on product, CRM [customer relationship management], stores etc. are propelling a good market share progression.

Operating margin expanded 190bp to 21.0%, driven by strong gross margins, partially offset SG&A expense deleverage. Gross margins rose 250bp to 59.9%, which was better than our 58.0% estimate. This was due to easing commodity cost pressures, price increases implemented earlier in the year, and modest fixed cost leverage on strong sales. We were surprised at the GM strength in light of the weakness in Japan.

Japan is Tiffany's most profitable region, so we thought weakness there would crimp GM gains for the quarter. Tiffany's SG&A expense rate grew by 60bp to 38.9%, slightly better than our estimate for 120bp of deleverage. Incremental marketing expenses and higher labor and store-related costs more than offset sales growth. Total SG&A dollars increased by 9% versus our 10% estimate.

Edward Yruma, KeyBanc Capital Markets (Buy: $110 PT)

Tiffany raised its 2014 EPS guidance range to $4.20-$4.30 from $4.15-$4.25, which seems appropriately conservative. The guidance is largely in line with the current consensus estimate of $4.28. We think the $0.05 increase in the guidance range following the meaningful beat this quarter (actual EPS was $0.11 ahead of consensus estimates) is likely conservative, but given the still difficult retail environment, we feel this is the appropriate action to take.

We note that this earnings raise follows a $0.19 earnings beat and $0.10 guidance raise in the 1Q. Tiffany also repurchased $9 million shares under its $300 million repurchase program; we note that the Company did not repurchase shares in 2013 likely due to the overhang of the Swatch arbitration. Our estimates and outlook are under review.

Ike Boruchow, Sterne Agee (Buy; $110 PT)

TIF continues to beat expectations through a combination of meaningful GM expansion (cost deflation, pricing) and U.S. turnaround efforts (a second straight +8% comp). Fashion jewelry is growing again, and the new "T" Collection, which launched last week, should accelerate that category. While there were a few wrinkles in the print (Japan, Europe), all in, TIF remains one of the most fundamentally sound stories in retail today.

TheStreet Ratings team rates TIFFANY & CO as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TIFFANY & CO (TIF) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 13.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for TIFFANY & CO is rather high; currently it is at 63.17%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.41% is above that of the industry average.
  • Net operating cash flow has significantly increased by 3255.93% to $76.62 million when compared to the same quarter last year. In addition, TIFFANY & CO has also vastly surpassed the industry average cash flow growth rate of 25.53%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 50.3% when compared to the same quarter one year prior, rising from $83.58 million to $125.61 million.
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.

--Written by Laurie Kulikowski in New York.

Follow @LKulikowski

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.