Signet Jewelers Limited Surprised Analysts With A Profit, And Analysts Boosted Their EPS Forecasts
Signet Jewelers Limited (NYSE:SIG) shareholders are probably feeling a little disappointed, since its shares fell 6.8% to US$29.28 in the week after its latest third-quarter results. In addition to beating expectations by 14% with revenues of US$1.3b, Signet Jewelers delivered a surprise (statutory) profit of US$0.02 per share, a sweet improvement compared to the losses that the analysts forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Check out our latest analysis for Signet Jewelers
After the latest results, the four analysts covering Signet Jewelers are now predicting revenues of US$5.65b in 2022. If met, this would reflect a solid 8.8% improvement in sales compared to the last 12 months. Signet Jewelers is also expected to turn profitable, with statutory earnings of US$2.56 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.30b and earnings per share (EPS) of US$1.67 in 2022. So it seems there's been a definite increase in optimism about Signet Jewelers' future following the latest results, with a massive increase in the earnings per share forecasts in particular.
It will come as no surprise to learn that the analysts have increased their price target for Signet Jewelers 72% to US$25.00on the back of these upgrades. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Signet Jewelers, with the most bullish analyst valuing it at US$33.00 and the most bearish at US$17.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Signet Jewelers' rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 8.8%, well above its historical decline of 4.4% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 9.8% next year. So it looks like Signet Jewelers is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Signet Jewelers following these results. They also upgraded their revenue forecasts, although the latest estimates suggest that Signet Jewelers will grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Signet Jewelers going out to 2023, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Signet Jewelers you should be aware of, and 1 of them is concerning.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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