On Friday, Citi reaffirmed its Buy rating on Signet Jewelers (NYSE:SIG) with a steady price target of $119.00. The firm's projection for the first quarter earnings per share (EPS) is $0.72, which is slightly below the consensus estimate of $0.75. Comparable store sales are expected to decline by 8.2%, closely aligning with the consensus forecast of an 8.1% dip.
Signet is anticipated to confirm its fiscal year 2024 guidance, which was initially provided on April 3 in conjunction with their convertible preferred repurchase activity. The guidance projected an EPS ranging from $9.90 to $11.52, versus the consensus estimate of $10.64. Market participants are likely to have already factored in an in-line first-quarter performance and a reaffirmation of the fiscal year guidance.
The analysis also pointed out a shift in consumer preference towards lab-created diamonds, which have experienced price deflation. This trend is not seen as favorable for Signet due to the company's stronger position in the natural diamond segment. Engagement trends are showing signs of improvement, albeit with a smaller decline, and the firm notes that a turnaround in this sector could signal a multi-year positive impact for Signet.
Citi's stance on Signet remains positive despite growing concerns over the impact of lab-created diamonds on the company's performance. With Signet's shares trading at approximately 5.5 times the projected fiscal year 2024 EBITDA, Citi continues to recommend a Buy rating on the stock.
In other recent news, Signet Jewelers has seen a flurry of activity. The company reported a dip in sales in its fourth quarter, with total sales falling by 6% to $2.5 billion and same-store sales declining by 9.6%. Despite this, Signet increased its non-GAAP gross margin by 170 basis points and announced a $200 million increase in share repurchase authorization and a 26% hike in their common dividend.
Amid these developments, Wells Fargo (NYSE:WFC) maintained an Overweight rating on Signet Jewelers and boosted the price target to $125, citing a positive outlook due to indicators of strong Mother's Day sales. BofA Securities also raised its price target for Signet to $115 while maintaining a Neutral rating, following the company's updated financial guidance and anticipated impact of capital structure changes.
Signet Jewelers has also amended the terms of its Series A Convertible Preference Shares, repurchasing half of these shares and subsequently increasing its Fiscal 2025 non-GAAP diluted earnings per share (EPS) forecast. This move is expected to reduce Signet's diluted share count and is funded from the company's cash reserve.
Following these transactions, Signet revised its Fiscal 2025 non-GAAP diluted EPS outlook to a range of $9.90 to $11.52, up from the previous forecast.
However, UBS maintained a Buy rating on Signet Jewelers but reduced the price target to $128 from $134, following the company's fiscal year 2025 guidance which fell short of market expectations. Despite this, UBS forecasts a 9% five-year EPS compound annual growth rate for Signet Jewelers. These are among the recent developments for Signet Jewelers.
InvestingPro Insights
As Citi maintains a bullish outlook on Signet Jewelers, real-time data from InvestingPro aligns with this positive sentiment. Signet's aggressive share buyback strategy and its robust financial position, holding more cash than debt, are notable strengths highlighted by InvestingPro Tips. With a market capitalization of $4.77 billion and a low earnings multiple, reflected in a P/E ratio of 6.19, Signet stands out as a prominent player in the Specialty Retail industry. Additionally, the company's stock is trading near its 52-week high, showcasing investor confidence in its market position.
InvestingPro data further underscores Signet's solid financial health, with a Price/Book ratio of 2.2 and a robust gross profit margin of 39.4% over the last twelve months as of Q4 2024. Despite a slight downturn in revenue growth, the company's operating income margin remains healthy at 8.65%. Signet has also demonstrated a strong return on assets of 12.07% and has maintained dividend payments for 14 consecutive years, with a recent dividend yield of 1.09% and a remarkable dividend growth of 45%.
For investors looking for deeper insights and additional InvestingPro Tips, the comprehensive analysis available at InvestingPro could prove invaluable. With a total of 13 additional tips listed, interested readers can explore these by visiting https://www.investing.com/pro/SIG. To enhance the value of a yearly or biyearly Pro and Pro+ subscription, use the coupon code PRONEWS24 for an additional 10% off.
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