Back to top

Bear of the Day: American Eagle Outfitters

Read MoreHide Full Article

American Eagle Outfitters Inc. (AEO - Free Report) is a specialty retailer of casual apparel, accessories, outerwear, and footwear for men and women. It, along with its subsidiaries, engages in the designing and marketing of casual clothing.

Share Performance

Year-to-date, AEO shares have pulled back significantly, declining by a jaw-dropping 52% and coming nowhere close to the S&P 500’s performance.

Zacks Investment Research
Image Source: Zacks Investment Research

Stretching out the time frame to over the past year, the story remains the same – AEO shares have been stuck in a deep downtrend throughout the period, losing nearly 65% of their value and underperforming the S&P 500 extensively.

Zacks Investment Research
Image Source: Zacks Investment Research

This clothing retailer's poor share performance is just the first red flag.

Quarterly Performance

AEO has struggled to chain together EPS beats as of late, missing bottom line estimates by a very concerning 33% in its latest quarter. Additionally, quarterly revenue results leave something to be desired – AEO has beaten top line estimates just five times out of its ten last quarters, undoubtedly a sign that the company has struggled.

Estimate Revisions

Analysts have been negatively revising their earnings estimates across the board over the last 60 days, with nearly a 100% agreement revision percentage across all time frames.

Zacks Investment Research
Image Source: Zacks Investment Research

For the upcoming quarter, the Consensus Estimate Trend has fallen by a double-digit 58%, reflecting EPS of $0.17 and a nasty 71% decline in earnings from the year-ago quarter.

Current fiscal year estimates also raise a red flag; the $1.32 EPS estimate displays a sizable 40% decrease in earnings year-over-year.

Bottom Line

AEO shares have been the victim of a deep double-digit valuation slash over the last year. This, paired with negative estimate revisions and weak revenue results, undoubtedly paints a grim picture for the company within the short term.

The company is a Zacks Rank #5 (Strong Sell) and a stock that investors will be better off staying away from for now. Instead, investors should pivot to stocks that either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) – the odds of reaping considerable gains are much higher within the companies that carry these ranks.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

American Eagle Outfitters, Inc. (AEO) - free report >>