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Will Business Momentum Aid American Eagle's (AEO) Q1 Earnings?

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American Eagle Outfitters, Inc. (AEO - Free Report) is expected to register robust top- and bottom-line growth when it reports first-quarter fiscal 2021 numbers on May 26, after the closing bell. The Zacks Consensus Estimate for the fiscal first-quarter revenues is pegged at $1.02 billion, which indicates growth of 85.3% from the year-ago quarter’s reported figure. The company witnessed a top-line decline of 2% in the last reported quarter.

The Zacks Consensus Estimate for fiscal first-quarter earnings is currently pegged at 46 cents per share, suggesting substantial growth from a loss of 84 cents reported in the year-ago quarter. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has moved up by 64.3% in the past 30 days.

In the last reported quarter, the company delivered an earnings surprise of 8.3%. However, it delivered a negative earnings surprise of 39.3%, on average, in the trailing four quarters.

American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise


American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise

American Eagle Outfitters, Inc. price-consensus-eps-surprise-chart | American Eagle Outfitters, Inc. Quote

Key Factors to Note

American Eagle is expected to have benefited from strength in brands and strategic endeavors in the first quarter of fiscal 2021. In the recently issued business update for the fiscal first quarter, management noted that American Eagle’s business is surpassing expectations and is likely to achieve quarterly revenues of more than $1 billion. This suggests mid-teen growth from the pre-pandemic first-quarter fiscal 2019. We note that American Eagle generated total net revenues of $886.3 million in the first quarter of fiscal 2019.

Moreover, the company pointed out that demand across the American Eagle (“AE”) and Aerie brands have accelerated in the fiscal first quarter. This is likely to have resulted in stronger margins on increased full-priced selling and lower promotions. Accordingly, management projected operating income of $120 million for the first quarter of fiscal 2021. This indicates substantial growth from operating income of $48 million and adjusted operating income of $49 million reported in the first quarter of fiscal 2019.

Furthermore, the economic stimulus, consumer optimism and pent-up demand are likely to have acted as tailwinds in the to-be-reported quarter. American Eagle has also been witnessing significant digital demand, particularly due to the pandemic-led shift to online shopping. Gains from the online business are expected to get reflected in the company’s fiscal first-quarter results. Also, management is encouraged about the Aerie label, which has been outpacing expectations and is expected to have maintained the momentum in the fiscal first quarter.

Additionally, the company’s priorities, mainly focused on the “Real Power. Real Growth.” value creation plan, bode well. The efforts are expected to have fuelled growth across brands and channels, and attract new customers, thus, aiding the top line in the fiscal first quarter.

However, higher SG&A expenses, stemming from greater performance-based incentive compensation, are anticipated to have been headwinds. Also, the company’s top line is expected to have been somewhat impacted by the persistence of the pandemic-led soft mall traffic trends and store closures in some regions. In the last reported quarter, store revenues declined 20% year over year due to lower mall traffic. Also, store-closure impact across Canada, California and other regions hurt the top line.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for American Eagle this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

American Eagle has a Zacks Rank #2 and an Earnings ESP of -1.69%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Abercrombie & Fitch Company (ANF - Free Report) has an Earnings ESP of +43.82% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods, Inc. (DKS - Free Report) has an Earnings ESP of +17.59% and a Zacks Rank #2 at present.

Nordstrom, Inc. (JWN - Free Report) currently has an Earnings ESP of +14.93% and a Zacks Rank #3.

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