On Friday, Citi maintained its Buy rating and $119.00 price target for Signet Jewelers (NYSE:SIG), following the company's first-quarter earnings report. The firm's assessment came after Signet's sales for the quarter met expectations, while earnings per share exceeded forecasts due to lower selling, general and administrative expenses (SG&A) and a reduced tax rate. Management reaffirmed their full-year 2024 guidance and provided second-quarter projections that align with the higher end of consensus estimates.
Despite the generally positive financial outcomes, Signet's stock experienced a 15% decline post-earnings. This market reaction was attributed to management's admission of increased promotional activity during the first quarter, which was more than initially planned, and the acknowledgment of potential risks associated with higher promotions moving forward. However, Citi believes the market has overreacted to these comments, noting there could be compensating factors should promotions escalate.
In terms of performance, Signet reported a 2-4% decrease in sales during the start of the second quarter, a trend that has remained consistent throughout the period. Nonetheless, management anticipates an uptick in engagement ring units sold in the second quarter, signaling improvements in both engagement and fashion jewelry segments. Citi's forecast for a second-half rebound in comparable store sales, particularly in the third quarter, remains intact.
Prior to the earnings release, Citi had lowered Signet's position in its investment ranking. However, with the current stock valuation reflecting a fiscal year 2024 enterprise value to EBITDA (EV/EBITDA) multiple of 4.7 times, the firm has now elevated Signet back into its top five ranked Buy recommendations. The positive outlook is based on the company's performance and the perceived overreaction of the market to the concerns raised by Signet's management.
In other recent news, Signet Jewelers Limited reported a robust first quarter for the fiscal year 2025, with revenues reaching $1.5 billion and an adjusted operating income of $58 million. This growth has been attributed to a resurgence in engagement sales, the success of new fashion product lines, and a strong performance in jewelry services. Additionally, the company raised its full-year guidance, anticipating positive same-store sales in the latter half of the year.
Signet Jewelers also highlighted its strategic focus on investing in the business, rewarding shareholders, and exploring potential mergers and acquisitions. The company's second-quarter revenue is projected to be between $1.46 billion and $1.52 billion, with same-store sales expected to decrease between 2% to 6%. Despite a decline in average transaction value for loose stone sales, the company managed to maintain its gross margin at approximately 38% of sales.
InvestingPro Insights
Signet Jewelers (NYSE:SIG (LON:SHI)) has displayed a notable financial resilience despite the recent market volatility. With a market capitalization of $4.12 billion and a compelling price-to-earnings (P/E) ratio of 8.2, which further adjusts to an even more attractive 5.3 for the last twelve months as of Q4 2024, the company stands out as a value investment opportunity. The PEG ratio for the same period stands at an exceptionally low 0.04, suggesting that the stock may be undervalued relative to its earnings growth potential.
InvestingPro Tips highlight that Signet is a prominent player in the Specialty Retail industry with a strong financial position, holding more cash than debt on its balance sheet and boasting a high shareholder yield. Additionally, the company has been aggressively buying back shares and has maintained dividend payments for 14 consecutive years, with a dividend yield of 1.26% as of 2024. Analysts have also revised their earnings upwards for the upcoming period, indicating confidence in the company's performance.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available on InvestingPro's platform. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking valuable insights that could further inform investment decisions. Signet's next earnings date is slated for August 29, 2024, providing an upcoming opportunity to assess the company's ongoing financial health and market position.
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