Is Signet Jewelers Limited (SIG) part of your portfolio? If not, then it is the right time to add the stock to your portfolio as it is looks very promising and its underlying factors are capable of carrying the momentum further. The stock holds a Zacks Rank #1 (Strong Buy) and has surged roughly 51% year to date, demonstrating its inherent strength and long-term earnings growth projection of 8%. We believe it could prove to be a solid bet for investors.
Signet’s primary strength is its earnings surprise history. The company has outperformed the Zacks Consensus Estimate in 11 out of the past 14 quarters, with an average beat of 8.6%. In the last concluded quarter, this jewelry retailer outdid the Zacks Consensus Estimate by 1.1%. The company’s better-than-expected second-quarter fiscal 2015 results provided much impetus to the stock that crafted a new 52-week high of $118.27 on Aug 29, the day following its earnings announcement.
On an organic basis, the company posted earnings per share of $1.00 that came a penny ahead of the Zacks Consensus Estimate and increased 19% year over year. On an adjusted basis – including organic earnings as well as earnings attributable to Zale division’s 65 days performance – earnings were $1.01.
Total sales of $1,225.9 million were reported in the quarter, up 39.3% from the prior-year quarter driven by healthy performance of stores in the U.K. division and the acquisition of Zale. On an organic basis, revenues were $978.4 million, up 11.2%. The Zacks Consensus Estimate was $1,163 million.
Signet provided guidance for the third quarter as well as fiscal year after integrating the impact of the Zale acquisition. Moreover, the company has raised its 3-year synergies expectations to $150–$175 million, up from $100 million projected earlier. Management now projects adjusted earnings of 12–18 cents a share for the third quarter and $5.38 to $5.54 for fiscal 2015.
Estimates for Signet have been portraying an uptrend since the company delivered impressive second-quarter results. It seems that analysts have become more constructive on the stock's future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that increased 2.4% to $5.48 for fiscal 2015 and 2.5% to $6.58 for fiscal 2016 in the past 7 days.
We believe that the company remains focused on store remodeling, digital enhancement as well as outlet channel development.
Other Favorable Ranked Stocks
Other stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN) and Lithia Motors Inc. (LAD) both sporting a Zacks Rank #1, as well as Tiffany & Co. (TIF) carrying a Zacks Rank #2 (Buy).
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