The Street Not Taking A Shine To Signet Jewelers Just Yet

Citi maintained its Neutral rating on Signet Jewelers Ltd. (NYSE: SIG), saying it's not as optimistic as the company for an improvement in trends in the fourth quarter. The brokerage’s comments come even as Signet’s EPS and sales managed to top Street view.

“While comp trends improved in 3Q relative to 2Q, we expect 4Q comps to remain in negative territory (in line with guidance of down 2-4%),” analyst Paul Lejuez wrote in a note.

Lejuez pointed out that transactions remain negative despite sequential improvement in Jared comps, comps in oil/energy regions and bridal sales.

The analyst noted that Signet is dealing with either slowness in the market or losing market share. In Lejuez's view, a slower market is negative for the owner of the No. 1, No. 3 and No. 4 largest jewelry concepts.

In addition, a 1 percent drop in US sales implies that Signet is losing market share in an industry that is still growing.

Signet is also dealing with negative press following an investigative report that alleges the company’s Kay Jewelers is swapping diamonds with fakes.

However, the analyst raised his fourth quarter EPS estimate from $3.72 to $3.94 (below guidance of $4.00-$4.20) based on higher margins. Lejuez also increased his F16 EPS view from $7.03 to $7.34. Given higher estimates, the analyst upped his price target from $83 to $90.

At last check, shares of Signet rose 3.47 percent to $93.94.