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Bear of the Day: Signet (SIG)


It’s tough being bearish on anything in this market. After the tax cut hit the news wire, a rash of upgrades has hit the market. That’s especially great for the small cap stocks out there. Anything domestically inclined is really rocking and rolling right now. However, there are a few areas of the stock market that are still under pressure. One of those areas is retail. There’s still a huge struggle out there for retailers fighting for their life with tons of pressure coming from online giants like Amazon.

Today’s Bear of the Day is unique as it is a retail name but because it’s in the jewelry business it faces different risks. I’m talking about Signet Jewelers (SIG). Signet Jewelers Limited engages in the retail sale of diamond jewelry, watches, and other products in the United States, Canada, Puerto Rico, the United Kingdom, the Republic of Ireland, and the Channel Islands. Its Sterling Jewelers division operates stores in malls and off-mall locations primarily under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria of Jewelry, Jared Vault, and various mall-based regional brands.

Analysts soured on the stock about sixty days ago after its last earnings report. Three analysts dropped their earnings estimates for the current quarter and next year. The drop in estimates took down the Zacks Consensus Estimate for the current quarter from $4.50 to $3.95. The current year number dipped from $7.08 to $6.27. The most dramatic move occurred in next year’s estimates where the consensus has come from $7.43 all the way down to $6.48.

These bearish estimate revisions have sent the stock tumbling over the last month a half. Before its last earnings report, Signet was trading above $77. Following the report, the stock dipped a toe into the sub-$50 level before recovering to retest the 50-day moving average. That retest failed, sending the stock back to the downside. Currently, the stock is trading around $54.50. It looks like another test of lows is coming soon.

Investors looking at other stocks in the same sector should check out Zacks Rank #1 (Strong Buy) Movado Group (MOV).

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