Citi reiterates Buy rating on Signet Jewelers stock after strong Q1

On Tuesday, Citi analysts reiterated their Buy rating for Signet Jewelers stock (NYSE: NYSE:SIG), maintaining a price target of $85.00. According to InvestingPro analysis, the stock appears undervalued, with a "GOOD" overall Financial Health score of 2.66 out of 5. The company generated $6.7 billion in revenue and $588 million in EBITDA over the last twelve months. The decision follows the company’s release of robust first-quarter comparable sales, which rose 2.5%, surpassing the consensus estimate of 1.1%. The increase was driven by an 8.0% rise in average unit retail prices.

Signet Jewelers’ management adjusted the lower end of their fiscal year 2025 guidance. They now expect comparable sales to range from a decline of 2.0% to an increase of 1.5%, compared to the previous range of a 2.5% decline to a 1.5% increase. The consensus expectation was a 0.3% decline. Earnings per share (EPS) guidance for the fiscal year was also raised to between $7.70 and $9.38, up from the previous range of $7.31 to $9.10, with the consensus at $8.20.

For the second quarter, management anticipates comparable sales to range from a decline of 1.5% to an increase of 1.0%, against a consensus of a 0.1% increase. The implied EPS for the second quarter is expected to be between $0.97 and $1.32, compared to a consensus of $1.13. The company’s conservative guidance reflects the expectation that comparisons will become easier, as June was the weakest month in the second quarter of the previous fiscal year.

Part of the increase in EPS guidance is attributed to the company’s share repurchase activities. Signet Jewelers repurchased $132 million worth of stock year-to-date, including during the second quarter to date, representing 5% of its outstanding shares. This aligns with management’s aggressive share buyback strategy, complemented by a 1.92% dividend yield and a track record of maintaining dividend payments for 15 consecutive years.

Citi analysts expect Signet Jewelers shares to trade higher following the strong first-quarter results and the upward revision in fiscal year 2025 guidance. For deeper insights into Signet Jewelers’ valuation and growth prospects, including 13 additional ProTips and comprehensive financial metrics, visit InvestingPro.

In other recent news, Signet Jewelers has been the focus of several significant developments. Citi analysts have maintained their Buy rating for Signet, setting a price target of $85, and anticipate the company will exceed consensus estimates for its first-quarter earnings per share (EPS). Meanwhile, UBS has also kept a Buy rating on Signet, raising its price target to $84, based on improved fundamentals and industry checks. On the other hand, Wells Fargo (NYSE:WFC) downgraded Signet’s stock from Overweight to Equal Weight, lowering the price target to $70 due to concerns over economic vulnerabilities and challenges with lab-grown diamonds.

Fitch Ratings has upgraded Signet’s credit rating to ’BBB-’ from ’BB+’, citing improved leverage and a stable outlook. This upgrade follows a decrease in Signet’s EBITDAR leverage, although challenges such as softening consumer sentiment remain. Additionally, Signet has announced restructuring costs ranging from $30 million to $45 million as part of its "Grow Brand Love" strategy, aiming to optimize its store fleet and improve operational efficiency. The company plans to close underperforming stores and reposition others, with the restructuring expected to be largely completed by the end of Fiscal 2026.

These recent developments highlight a period of strategic adjustments and financial evaluations for Signet Jewelers, as the company adapts to a changing market landscape.

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