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American Eagle (AEO) Q3 Earnings to Benefit From Robust Demand
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American Eagle Outfitters, Inc. (AEO - Free Report) is expected to register top and bottom-line growth when it reports third-quarter fiscal 2023 results on Nov 21. The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $1.3 billion, which indicates growth of 2.8% from the year-ago reported figure.
The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at 47 cents per share, suggesting 11.9% growth from the year-ago quarter's reported number. The Zacks Consensus Estimate for the to-be-reported quarter's earnings has moved up by a penny in the past 30 days.
The company’s earnings beat the Zacks Consensus Estimate by 66.7% in the last reported quarter. It has an earnings surprise of 43.2% for the trailing four quarters, on average.
American Eagle Outfitters, Inc. Price and EPS Surprise
American Eagle has been well-poised to benefit from brand strength and solid demand, driven by compelling products and exciting new marketing campaigns. The company is likely to have gained from favorable demand for its leading brands and expansionary efforts into new markets. It remains well placed on the back of its cost-reduction efforts, strength in Aerie and a solid online show. Also, the Real Power Real Growth value creation plan bodes well.
Innovation efforts, solid omnichannel capabilities and focus on efficient inventory management are likely to have boosted the top and bottom line in the to-be-reported quarter.
The company has been gaining from the robust Aerie brand, driven by strength across intimates, leggings, apparel and beauty and accessories, as well as OFFLINE activewear. The brand has been on an extraordinary growth trajectory, as evidenced by its remarkable first-quarter fiscal 2023 performance. Also, a solid online show is expected to have aided the fiscal third-quarter performance.
For the second half, the company anticipates a positive response to its early fall goods, which is likely to have a positive implication on the fiscal third-quarter sales, particularly the Aerie brand.
On the last reported quarter’s earnings call, management anticipated revenues to grow in the low single digits on a year-over-year basis.
Our model predicts third-quarter fiscal 2023 sales for the Aerie brand to increase 11.2% year over year. However, sales for the namesake brands are expected to decline 3.6% year over year.
Additionally, American Eagle’s profit improvement initiatives have been paying off. This, along with lower delivery, distribution and warehousing costs, are likely to continue aiding margins. Higher merchandising margins due to lower markdowns stemming from inventory control and lower transportation and product costs are expected to have acted as tailwinds in the to-be-reported quarter.
AEO envisions gross margin expansion in the second half of 2023, driven by lower freight and product costs, as well as reduced markdowns. Product cost and freight are also predicted to act as tailwinds in the second half of 2023.
We expect the gross margin to expand 380 basis points (bps) year over year to 42.5% in the fiscal third quarter, suggesting a decline in the cost of sales due to lower freight expenses.
AEO has been on track with the Real Power, Real Growth value-creation plan. Its third-quarter fiscal 2023 performance is expected to have benefited from significant progress on its Real Power Real Growth value creation plan. The plan has been driving profitability through real estate and inventory-optimization efforts, omni-channel and customer focus, and investments to improve the supply chain. The company’s efforts under the plan have been aiding the recovery of the American Eagle brand.
However, it has been witnessing elevated corporate compensation, incentives and other corporate expenses, which have been partially offset by the cost efficiencies. The increase in these expenses have been resulting in higher SG&A expenses. Rising costs and expenses, if not controlled, can partly weigh on its margins and profitability in the to-be-reported quarter.
On the last reported quarter’s earnings call, management anticipated SG&A to increase mid-teens in the fiscal third quarter. Operating income was projected in the range of $115-$125 million.
We expect SG&A expenses to increase 16.2% year over year to $361.4 million in the fiscal third quarter. Meanwhile, SG&A expenses, as a percentage of sales, are expected to increase 370 bps.
Our model predicts an adjusted operating margin of 9.2%, down 30 bps from the year-ago quarter’s actual. In dollar terms, adjusted operating income is likely to have declined 2.1% year over year to $115.1 million.
What the Zacks Model Unveils
Our proven model predicts a likely 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 an Earnings ESP of +5.50% and sports a Zacks Rank #1.
Other Stocks With Favorable Combination
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this season:
Abercrombie & Fitch (ANF - Free Report) currently has an Earnings ESP of +7.17% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for ANF’s quarterly revenues is pegged at $976.7 million, which suggests growth of 11% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for ANF’s earnings has moved up 1.9% to $1.09 per share in the past 30 days. The consensus estimate indicates a significant growth from 1 cent reported in the year-ago quarter.
Burlington Stores (BURL - Free Report) currently has an Earnings ESP of +0.19% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for BURL’s quarterly revenues is pegged at $2.3 billion, which suggests growth of 13.5% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for BURL’s earnings has moved down 2.9% to $1.01 per share in the past 30 days. The consensus estimate indicates a significant increase of 134.9% from that reported in the year-ago quarter.
Costco Wholesale (COST - Free Report) currently has an Earnings ESP of +4.26% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 results. The consensus mark for COST’s quarterly revenues is pegged at $57.7 billion, which suggests 6% growth from the figure reported in the prior-year quarter.
The consensus mark for COST’s quarterly earnings has been unchanged in the past 30 days at $3.43 per share. The consensus estimate suggests growth of 10.7% from the year-ago quarter.
Image: Bigstock
American Eagle (AEO) Q3 Earnings to Benefit From Robust Demand
American Eagle Outfitters, Inc. (AEO - Free Report) is expected to register top and bottom-line growth when it reports third-quarter fiscal 2023 results on Nov 21. The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $1.3 billion, which indicates growth of 2.8% from the year-ago reported figure.
The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at 47 cents per share, suggesting 11.9% growth from the year-ago quarter's reported number. The Zacks Consensus Estimate for the to-be-reported quarter's earnings has moved up by a penny in the past 30 days.
The company’s earnings beat the Zacks Consensus Estimate by 66.7% in the last reported quarter. It has an earnings surprise of 43.2% for the trailing four quarters, on average.
American Eagle Outfitters, Inc. Price and EPS Surprise
American Eagle Outfitters, Inc. price-eps-surprise | American Eagle Outfitters, Inc. Quote
Key Factors to Note
American Eagle has been well-poised to benefit from brand strength and solid demand, driven by compelling products and exciting new marketing campaigns. The company is likely to have gained from favorable demand for its leading brands and expansionary efforts into new markets. It remains well placed on the back of its cost-reduction efforts, strength in Aerie and a solid online show. Also, the Real Power Real Growth value creation plan bodes well.
Innovation efforts, solid omnichannel capabilities and focus on efficient inventory management are likely to have boosted the top and bottom line in the to-be-reported quarter.
The company has been gaining from the robust Aerie brand, driven by strength across intimates, leggings, apparel and beauty and accessories, as well as OFFLINE activewear. The brand has been on an extraordinary growth trajectory, as evidenced by its remarkable first-quarter fiscal 2023 performance. Also, a solid online show is expected to have aided the fiscal third-quarter performance.
For the second half, the company anticipates a positive response to its early fall goods, which is likely to have a positive implication on the fiscal third-quarter sales, particularly the Aerie brand.
On the last reported quarter’s earnings call, management anticipated revenues to grow in the low single digits on a year-over-year basis.
Our model predicts third-quarter fiscal 2023 sales for the Aerie brand to increase 11.2% year over year. However, sales for the namesake brands are expected to decline 3.6% year over year.
Additionally, American Eagle’s profit improvement initiatives have been paying off. This, along with lower delivery, distribution and warehousing costs, are likely to continue aiding margins. Higher merchandising margins due to lower markdowns stemming from inventory control and lower transportation and product costs are expected to have acted as tailwinds in the to-be-reported quarter.
AEO envisions gross margin expansion in the second half of 2023, driven by lower freight and product costs, as well as reduced markdowns. Product cost and freight are also predicted to act as tailwinds in the second half of 2023.
We expect the gross margin to expand 380 basis points (bps) year over year to 42.5% in the fiscal third quarter, suggesting a decline in the cost of sales due to lower freight expenses.
AEO has been on track with the Real Power, Real Growth value-creation plan. Its third-quarter fiscal 2023 performance is expected to have benefited from significant progress on its Real Power Real Growth value creation plan. The plan has been driving profitability through real estate and inventory-optimization efforts, omni-channel and customer focus, and investments to improve the supply chain. The company’s efforts under the plan have been aiding the recovery of the American Eagle brand.
However, it has been witnessing elevated corporate compensation, incentives and other corporate expenses, which have been partially offset by the cost efficiencies. The increase in these expenses have been resulting in higher SG&A expenses. Rising costs and expenses, if not controlled, can partly weigh on its margins and profitability in the to-be-reported quarter.
On the last reported quarter’s earnings call, management anticipated SG&A to increase mid-teens in the fiscal third quarter. Operating income was projected in the range of $115-$125 million.
We expect SG&A expenses to increase 16.2% year over year to $361.4 million in the fiscal third quarter. Meanwhile, SG&A expenses, as a percentage of sales, are expected to increase 370 bps.
Our model predicts an adjusted operating margin of 9.2%, down 30 bps from the year-ago quarter’s actual. In dollar terms, adjusted operating income is likely to have declined 2.1% year over year to $115.1 million.
What the Zacks Model Unveils
Our proven model predicts a likely 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 an Earnings ESP of +5.50% and sports a Zacks Rank #1.
Other Stocks With Favorable Combination
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this season:
Abercrombie & Fitch (ANF - Free Report) currently has an Earnings ESP of +7.17% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for ANF’s quarterly revenues is pegged at $976.7 million, which suggests growth of 11% from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s earnings has moved up 1.9% to $1.09 per share in the past 30 days. The consensus estimate indicates a significant growth from 1 cent reported in the year-ago quarter.
Burlington Stores (BURL - Free Report) currently has an Earnings ESP of +0.19% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for BURL’s quarterly revenues is pegged at $2.3 billion, which suggests growth of 13.5% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for BURL’s earnings has moved down 2.9% to $1.01 per share in the past 30 days. The consensus estimate indicates a significant increase of 134.9% from that reported in the year-ago quarter.
Costco Wholesale (COST - Free Report) currently has an Earnings ESP of +4.26% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 results. The consensus mark for COST’s quarterly revenues is pegged at $57.7 billion, which suggests 6% growth from the figure reported in the prior-year quarter.
The consensus mark for COST’s quarterly earnings has been unchanged in the past 30 days at $3.43 per share. The consensus estimate suggests growth of 10.7% from the year-ago quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.