American Eagle Outfitters, Inc. (AEO Quick QuoteAEO - Free Report) is expected to register top-line growth when it reports third-quarter fiscal 2024 results on Dec. 4. The Zacks Consensus Estimate for revenues is pegged at $1.30 billion, which indicates a rise of 0.3% from the year-ago figure.

The consensus estimate for earnings is pegged at 46 cents per share, indicating a 6.1% drop from the year-ago quarter's number. The Zacks Consensus Estimate for earnings has moved down a penny in the past 30 days.

The company’s earnings beat the consensus estimate by 2.6% in the last reported quarter. It delivered an earnings surprise of 12% in the trailing four quarters, on average.

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Key Factors Likely to Impact AEO’s Q3 Results

American Eagle’s fiscal third-quarter performance is expected to have benefited from continued brand strength and solid demand, driven by compelling products and exciting new marketing campaigns. Favorable demand for its leading brands and expansion efforts into new markets have been driving its top-line performance. Innovation efforts, solid omnichannel capabilities and inventory-optimization efforts are likely to have boosted the company’s performance.

In addition, AEO’s cost-reduction efforts, strength in Aerie and solid online show remain key drivers. 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. Its flagship brand has also doing well for a while. Tops, skirts, dresses and shorts have been performing well. We expect sales rise of 1% for American Eagle and 0.7% for Aerie in the fiscal third quarter.

American Eagle is on track with its Powering Profitable Growth plan and remains committed to amplifying brands, optimizing operations and executing the financial discipline. AEO’s profit improvement initiatives have been paying off. These strengths are likely to have bolstered the company’s performance.

Management, on its last earnings call for the fiscal third quarter, anticipates operating income to be in the range of $120-$125 million compared with our estimate of $122.9 million. American Eagle expects comparable sales to grow in the band of 3-4%, with total revenues estimated to remain flat to rise slightly due to the impact of the retail calendar. SG&A is likely to leverage, with dollars down slightly, owing to the efficiencies in key focus areas. We expect comparable sales to increase 3.2% and revenues to rise 0.5% for the same quarter.

However, AEO is exposed to a tough operating landscape, including inflationary pressures and other macroeconomic headwinds. The evolving consumer spending patterns have been concerning as well. Further, increased corporate compensation, incentives and other corporate expenses are deterrents. These expenses are likely to have weighed on the company’s profitability.

What the Zacks Model Unveils for AEO

Our proven model does not 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. But that’s not the case here. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

American Eagle currently has an Earnings ESP of -0.62% and a Zacks Rank of 3.

AEO’s Valuation Picture

From a valuation perspective, American Eagle’s shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 9.76X, below the five-year median of 12.33X and the Retail-Apparel & Shoes industry’s average of 17.19X, the stock offers compelling value for investors seeking exposure to the sector. Additionally, the stock currently has a Value Score of A, further validating its appeal.

Stocks With the Favorable Combination

Here are some companies, which, according to our model, have the right combination of elements to post an earnings beat this season:

Torrid Holdings (CURV Quick QuoteCURV - Free Report) presently has an Earnings ESP of +23.08% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here. 

The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2024 results. The consensus mark for CURV’s quarterly revenues is pegged at $2.8 billion, which indicates 2.7% growth from the figure reported in the prior-year quarter. 

The consensus mark for Torrid Holdings’ quarterly earnings has moved up a penny in the past 30 days to 3 cents per share. The consensus estimate indicates an increase of 200% from the year-ago quarter’s actual.

Dollar Tree (DLTR Quick QuoteDLTR - Free Report) currently has an Earnings ESP of +2.80% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2024 results. The consensus mark for DLTR’s quarterly revenues is pegged at $7.5 billion, which indicates growth of 1.9% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Dollar Tree’s earnings has moved up a penny to $1.07 per share in the past 30 days. The consensus estimate indicates a rise of 10.3% from the year-ago quarter’s actual.

lululemon athletica (LULU Quick QuoteLULU - Free Report) currently has an Earnings ESP of +0.25% and a Zacks Rank of 3. LULU is likely to register top-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.4 billion, indicating 6.8% growth from the figure reported in the year-ago quarter.

The consensus estimate for LULU’s earnings has been stable at $2.73 per share in the past 30 days. The consensus estimate indicates a rise of 7.9% from the year-ago quarter’s actual.