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Signet's Credit Catalyst Begins To Gain Clarity

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Wells Fargo reaffirmed its Outperform rating on Signet Jewelers Ltd. (NYSE: SIG) as the company’s credit catalyst is gaining clarity and there are multiple compelling growth drivers.

Ike Boruchow said Signet sounded like it's “pretty far along” in its credit review process and seems to have a clear view for the prime piece of the book. The company’s comments also suggest there are multiple interested parties for the subprime portion.

The analyst also said Signnet’s initial guide to start the FY seems prudent and achievable, with comps planned down low-to-mid single digits.

“[W]e see potential for brighter days ahead (Q2 comps should benefit from easier compares and Mother’s Day shift) and a potential catalyst from a credit sale (assuming credit economics can remain relatively stable) - which makes the stock’s valuation appear highly compelling,” Boruchow wrote in a note.

Multiple Growth Drivers

Meanwhile, Signet reported fourth quarter adjusted EPS of $4.03, with comps declining 4.5 percent amid broad weakness on difficult retail environment and lost wallet share due to not being as promotional as competitors.

Boruchow cut the valuation range to $95 to $100 from $108 to $110. But the analyst believes shares may have found a bottom until he gains more clarity around credit over the next month or so.

“SIG has multiple compelling growth drivers, including share gains in a large and fragemented mid-tier jewelry market and accretion from the Zale acquisition,” Boruchow added.

At last check, shares of Signet were up 0.71 percent to $70.55.

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Latest Ratings for SIG

DateFirmActionFromTo
Sep 2018CitigroupDowngradesNeutralSell
Aug 2018Wells FargoMaintainsMarket PerformMarket Perform
Jul 2018NomuraDowngradesBuyNeutral

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Posted-In: Ike Boruchow Wells FargoAnalyst Color Reiteration Analyst Ratings

 

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