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Things to Note Ahead of American Eagle's (AEO) Q4 Earnings
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American Eagle Outfitters, Inc. (AEO - Free Report) is expected to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results on Mar 7. The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $1.7 billion, which indicates growth of 11.2% from the year-ago reported figure.
The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 50 cents per share, suggesting 35.1% growth from the year-ago quarter's reported number. The Zacks Consensus Estimate for the to-be-reported quarter's earnings has been unchanged in the past 30 days.
The company’s earnings beat the Zacks Consensus Estimate by 2.1% in the last reported quarter. It has an earnings surprise of 23% 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 has been 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 lines in the to-be-reported quarter.
The company has been gaining from the robust Aerie brand, driven by sturdy demand in its core apparel, activewear extension, strength in the OFFLINE brand and renewed momentum in intimates. The brand has been on an extraordinary growth trajectory, which is likely to have continued in the to-be-reported quarter. A solid online show is expected to have aided the fiscal fourth-quarter performance.
Additionally, the company recently reported strong holiday sales. Consequently, it anticipates strong fourth-quarter fiscal 2023 results on record holiday sales and robust merchandise margins. In the holiday results, the company pointed out that it witnessed growth across both brands during the holiday period. This is likely to get reflected in its top-line results for the fiscal fourth quarter.
At the holiday sales release, management stated that it was confident about delivering solid earnings growth and operating rate improvement in the fiscal fourth quarter, driven by inventory and promotional discipline, expense-control prioritization, and gains from profit-improvement initiatives.
Management projected fourth-quarter revenues to improve in the low-double digits, including a four-point contribution from the 53rd week. It estimated an operating profit of $130 million. The view does not include potential asset impairment and restructuring charges.
Our model predicts fourth-quarter fiscal 2023 sales for the AE and Aerie brands to increase 12.1% and 9.8% year over year, respectively.
Additionally, American Eagle’s profit improvement initiatives have been paying off. This, along with lower delivery, distribution and warehousing costs, is likely to have aided 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.
We expect the gross margin to expand 340 basis points (bps) year over year to 37.3% in the fiscal fourth quarter due to lower freight expenses.
AEO has been on track with the Real Power, Real Growth value-creation plan. Its fourth-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 has been leading to higher SG&A expenses. Rising costs and expenses are expected to have partly weighed on its margins and profitability in the to-be-reported quarter.
We expect SG&A expenses to increase 21.6% year over year in the fiscal fourth quarter. Meanwhile, SG&A expenses, as a percentage of sales, are expected to increase 240 bps.
Our model predicts an adjusted operating margin of 7.9%, up 150 bps from the year-ago quarter’s actual. In dollar terms, adjusted operating income is likely to have increased 36.1% year over year to $130.3 million.
What the Zacks Model Unveils
Our proven model predicts 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 an Earnings ESP of +1.13% and currently 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:
DICK'S Sporting Goods (DKS - Free Report) currently has an Earnings ESP of +2.03% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The consensus mark for DKS’ quarterly revenues is pegged at $3.8 billion, which suggests growth of 4.2% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DICK'S Sporting earnings has moved up 1.2% to $3.33 per share in the past 30 days. The consensus estimate indicates growth of 13.7% from the year-ago quarter’s actual.
Costco Wholesale (COST - Free Report) presently has an Earnings ESP of +1.58% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports fourth-quarter fiscal 2023 results. The consensus mark for COST’s quarterly revenues is pegged at $59.2 billion, which suggests 7.1% growth from the figure reported in the prior-year quarter.
The consensus mark for COST’s quarterly earnings has moved up 1.1% in the past 30 days to $3.60 per share. The consensus estimate suggests growth of 9.1% from the year-ago quarter’s actual.
Dollar Tree (DLTR - Free Report) currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The consensus mark for DLTR’s quarterly revenues is pegged at $8.7 billion, which suggests growth of 12.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DLTR’s earnings has been unchanged at $2.66 per share in the past 30 days. The consensus estimate indicates 30.4% growth from the year-ago quarter’s reported figure.
Image: Bigstock
Things to Note Ahead of American Eagle's (AEO) Q4 Earnings
American Eagle Outfitters, Inc. (AEO - Free Report) is expected to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results on Mar 7. The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $1.7 billion, which indicates growth of 11.2% from the year-ago reported figure.
The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 50 cents per share, suggesting 35.1% growth from the year-ago quarter's reported number. The Zacks Consensus Estimate for the to-be-reported quarter's earnings has been unchanged in the past 30 days.
The company’s earnings beat the Zacks Consensus Estimate by 2.1% in the last reported quarter. It has an earnings surprise of 23% 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 has been 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 lines in the to-be-reported quarter.
The company has been gaining from the robust Aerie brand, driven by sturdy demand in its core apparel, activewear extension, strength in the OFFLINE brand and renewed momentum in intimates. The brand has been on an extraordinary growth trajectory, which is likely to have continued in the to-be-reported quarter. A solid online show is expected to have aided the fiscal fourth-quarter performance.
Additionally, the company recently reported strong holiday sales. Consequently, it anticipates strong fourth-quarter fiscal 2023 results on record holiday sales and robust merchandise margins. In the holiday results, the company pointed out that it witnessed growth across both brands during the holiday period. This is likely to get reflected in its top-line results for the fiscal fourth quarter.
At the holiday sales release, management stated that it was confident about delivering solid earnings growth and operating rate improvement in the fiscal fourth quarter, driven by inventory and promotional discipline, expense-control prioritization, and gains from profit-improvement initiatives.
Management projected fourth-quarter revenues to improve in the low-double digits, including a four-point contribution from the 53rd week. It estimated an operating profit of $130 million. The view does not include potential asset impairment and restructuring charges.
Our model predicts fourth-quarter fiscal 2023 sales for the AE and Aerie brands to increase 12.1% and 9.8% year over year, respectively.
Additionally, American Eagle’s profit improvement initiatives have been paying off. This, along with lower delivery, distribution and warehousing costs, is likely to have aided 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.
We expect the gross margin to expand 340 basis points (bps) year over year to 37.3% in the fiscal fourth quarter due to lower freight expenses.
AEO has been on track with the Real Power, Real Growth value-creation plan. Its fourth-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 has been leading to higher SG&A expenses. Rising costs and expenses are expected to have partly weighed on its margins and profitability in the to-be-reported quarter.
We expect SG&A expenses to increase 21.6% year over year in the fiscal fourth quarter. Meanwhile, SG&A expenses, as a percentage of sales, are expected to increase 240 bps.
Our model predicts an adjusted operating margin of 7.9%, up 150 bps from the year-ago quarter’s actual. In dollar terms, adjusted operating income is likely to have increased 36.1% year over year to $130.3 million.
What the Zacks Model Unveils
Our proven model predicts 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 an Earnings ESP of +1.13% and currently 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:
DICK'S Sporting Goods (DKS - Free Report) currently has an Earnings ESP of +2.03% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The consensus mark for DKS’ quarterly revenues is pegged at $3.8 billion, which suggests growth of 4.2% 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 DICK'S Sporting earnings has moved up 1.2% to $3.33 per share in the past 30 days. The consensus estimate indicates growth of 13.7% from the year-ago quarter’s actual.
Costco Wholesale (COST - Free Report) presently has an Earnings ESP of +1.58% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports fourth-quarter fiscal 2023 results. The consensus mark for COST’s quarterly revenues is pegged at $59.2 billion, which suggests 7.1% growth from the figure reported in the prior-year quarter.
The consensus mark for COST’s quarterly earnings has moved up 1.1% in the past 30 days to $3.60 per share. The consensus estimate suggests growth of 9.1% from the year-ago quarter’s actual.
Dollar Tree (DLTR - Free Report) currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The consensus mark for DLTR’s quarterly revenues is pegged at $8.7 billion, which suggests growth of 12.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DLTR’s earnings has been unchanged at $2.66 per share in the past 30 days. The consensus estimate indicates 30.4% growth from the year-ago quarter’s reported figure.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.