On Thursday, legendary jeweler Tiffany & Co. (TIF) reported its second-quarter earnings. Put simply: They were a gem.

In the period ended July 31st, the New York-based company reported a gain of approximately $80.8 million or $0.63 per share gain. That’s a big jump up from the roughly $40.5 million or $0.29 per share it turned in during the comparable period last year. Its EPS number was also, to its credit, a hefty $0.08 north of analysts’ forecasts.

I think that we could see the sell side up its full-year numbers and possibly disseminate positive research in the near-term. I also can’t help but think that institutional investors looking for retail exposure may warm to the story.

My interest was also piqued by the fact that in conjunction with its earnings release, Tiffany said that it “expects net earnings in the full year to increase to $2.82 - $2.92 per diluted share, versus its previous forecast of $2.80 - $2.90.” Very simply, I think this news could go a long way toward luring investors and, with any luck, could generate some upbeat research.

Tiffany also repurchased and retired 1,723,201 shares of its common stock in the second quarter. Total cost: $73.7 million, or around $42.75 per share. The fact that the company spent its money on repurchasing stock is a terrific sign, and evidence of the board’s optimism.

Finally, I like what I’m seeing on the margin front as well. In the quarter, Tiffany’s gross margin rose about 170-basis points compared to the same period last year, which indicates that the company isn’t getting killed by markdowns and is keeping its costs in check. The number also gives me confidence that it has a decent shot of meeting the aforementioned 2008 forecast.

On the downside, Tiffany & Co. has been doing so well that the investment community may now expect this type of performance quarter in and quarter out - which I think would be difficult to maintain. I’m also concerned that high expectations could mean that any shortfall or flub could hit the stock in a big way.

Tiffany closed at $43.85, up $4.24 or 10.7%.

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