Analysts expect Blue Nile to post 16-cent profit

NEW YORK - Jeweler Blue Nile reports earnings for the third quarter on Tuesday. Here are the key developments and analyst opinions related to that period.

OVERVIEW: The online jeweler has suffered as more consumers are scaling back on discretionary spending in a weak U.S. economy. On the positive side, Blue Nile has low inventory and operating costs because it operates only online.

Blue Nile also has little exposure to fluctuations in foreign currencies because its customers are mostly in the U.S., so the recent strength in the U.S. dollar is unlikely to affect the company as much as its rivals. In the second quarter, international sales accounted for just 11 percent of total revenue.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect earnings of 16 cents per share and sales of $68.9 million.

ANALYST TAKE: RBC Capital Markets analyst Stephen Ju, who rates the stock "Sector Perform," lowered his price target to $35 from $44, implying the stock could rise 21 percent from Thursday's closing price of $28.96.

Ju expects the economic slowdown to persist next year and predicts this will continue to affect Blue Nile's business.

"Given its relatively higher ticket, Blue Nile was one of the first among our e-commerce coverage universe to be affected by the slowdown," Ju wrote in a client note.

Ju said that Wall Street expectations for 7 percent revenue growth in the fourth quarter seem "increasingly unlikely" because of deteriorating consumer sentiment.

WHAT'S AHEAD: Given the U.S. economic weakness, many analysts and investors are looking toward the holiday season with trepidation. The industry is also monitoring diamond prices, which started to increase in the second quarter but moderated somewhat in the third quarter.

STOCK PERFORMANCE: Shares of Blue Nile have declined 57.4 percent so far this year. During the quarter, shares rose 0.8 percent.

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