On Thursday, Signet Jewelers (NYSE: NYSE:SIG) received an upgrade from CFRA, moving from a Sell to a Hold rating. The firm also increased the price target for the company's shares to $99.00, up from the previous target of $81.00.
The new target is based on 9.2 times the firm's fiscal year 2025 earnings per share (EPS) estimate of $10.72, which has been raised by $0.58. The EPS projection for fiscal year 2026 has also been increased by $0.29 to $11.01.
The upgrade follows the company's fiscal second quarter adjusted EPS of $1.25, which was a year-over-year decline of 20% and fell short of expectations by $0.10. Revenue also dropped by 7.6% year-over-year to $1.49 billion, which was approximately 1% below the consensus. Despite a contraction in same-store sales of 3.4%, this was an improvement from the first quarter's contraction of 8.9%.
In North America, Signet Jewelers saw a modest increase in the average transaction value, up 1.6%. However, the number of transactions is estimated to have decreased by a mid- to high-single digit percentage. The gross margin slightly improved to 38%, aided by a 120 basis point increase in merchandise margin, attributed to strong performance in fashion and service attachment.
The company now expects its EBIT margin for the year to be at the lower end of its guidance range, between 8.9% and 9.6%. CFRA remains skeptical about the sustainability of the current trend, noting that Signet maintains its engagement floor at -5% and is counting on additional cost savings to reach a new engagement ceiling of +5%. Despite these concerns, the firm concludes that the stock's current valuation offers a more balanced risk/reward scenario for investors.
In other recent news, Signet Jewelers Limited reported its second quarter fiscal 2025 results, beating earnings expectations but missing on revenue. The diamond jewelry retailer posted adjusted earnings per share of $1.25, surpassing the analyst consensus of $1.18. Conversely, revenue was reported at $1.5 billion, slightly under the estimated $1.51 billion, marking a 7.6% YoY decrease.
The company's same store sales saw a decline of 3.4% compared to the same quarter last year. Despite this, CEO Virginia C. Drosos thanked the team for delivering the fifth consecutive quarter of sequential same store sales improvement. For the third quarter, Signet projects revenue between $1.34-$1.38 billion, and maintains its full year fiscal 2025 guidance, with anticipated revenue of $6.66-$7.02 billion and adjusted EPS of $9.90-$11.52.
Despite the slight revenue miss, Signet's management expressed confidence in meeting annual targets. This optimism is largely attributed to growth in new high margin fashion merchandise and services.
The company has also raised its cost savings target to $200 million for the year. These are some of the recent developments surrounding Signet Jewelers Limited.
InvestingPro Insights
Following the recent CFRA upgrade and revised price targets for Signet Jewelers, it's insightful to view the company's financial health and market performance through the lens of InvestingPro data. With a market capitalization of $3.91 billion and a notably low P/E ratio of 6.07, Signet Jewelers stands out for its value proposition in the market. This is further emphasized by the adjusted P/E ratio for the last twelve months as of Q1 2025, which sits at an even lower 5.37, signaling the stock may be undervalued relative to its earnings.
InvestingPro Tips highlight that Signet Jewelers is not only a prominent player in the Specialty Retail industry but also exhibits a strong free cash flow yield, which is an attractive feature for investors seeking companies with solid financial health. Additionally, the company's commitment to returning value to shareholders is evident through its 14 consecutive years of maintained dividend payments, with a dividend yield of 1.49% as of the last recorded date in 2024. It's worth noting that there are numerous additional InvestingPro Tips available, which provide a comprehensive analysis of Signet Jewelers' financial status and market potential.
Investors considering Signet Jewelers should also take note of the company's recent stock price volatility, with a significant drop over the last three months. However, with analysts predicting profitability for the current year and a strong return over the last five years, the long-term outlook may still be favorable for risk-tolerant investors. For those interested in a deeper dive into the company's metrics and future projections, further InvestingPro Tips can be accessed for a more detailed investment strategy.
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