On Friday, Citi reiterated its Buy rating on Signet Jewelers (NYSE:SIG) stock with a steady price target of $119.00, highlighting the company's second-quarter performance that surpassed market expectations. Signet reported a smaller-than-expected decline in comparable sales and earnings per share above consensus estimates.
The company's second-quarter comparable sales decreased by 3.4%, which was favorable compared to the anticipated 4.8% drop. Additionally, Signet's earnings per share reached $1.25, topping the expected $1.03.
The firm emphasized the positive trends observed in the third quarter to date, with comparable sales and engagement units showing an upswing, potentially signaling a multi-year recovery in the bridal category. Furthermore, fashion jewelry sales are outperforming management's predictions, contributing positively to merchandise margins. This uptick in fashion jewelry sales is helping to balance out the impact of heightened promotional activities across the market.
Despite the competitive promotional environment, which had been a major concern among investors, Signet is demonstrating its capability to meet its full-year 2024 sales and earnings guidance. The company's performance in the fourth quarter remains a critical factor for the year's outcomes, but current trends suggest a positive trajectory.
Citi's analysis also points out that with Signet's shares trading at a forward fiscal year 2025 enterprise value to EBITDA ratio of 4.1 times, the risk/reward profile for the stock is considered favorable. This valuation metric is used by investors to assess a company's return potential relative to its current market value.
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