It has been about a month since the last earnings report for American Eagle Outfitters (AEO Quick QuoteAEO - Free Report) . Shares have added about 23.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is American Eagle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

American Eagle Q2 Earnings Beat Estimates on Tariff Refunds

American Eagle posted fiscal second-quarter 2026 earnings of 79 cents per share, up 75.6% year over year and above the Zacks Consensus Estimate of 21 cents. Net revenue rose 7.5% to $1.38 billion and beat the consensus mark of $1.37 billion.

The earnings beat was aided by tariff-refund benefits, while Aerie and OFFLINE momentum supported sales growth. Consolidated comparable sales increased 6%, and American Eagle showed sequential improvement from the first quarter.

AEO's Brand Sales Show Uneven Momentum

Aerie revenue increased 24.9% year over year to $535.8 million, while comparable sales advanced 19%. Management cited broad-based strength across channels and categories, including core apparel, intimates and activewear. OFFLINE also benefited from demand for Cloud Fleece, sports bras and bottoms.

American Eagle brand revenue rose 0.7% to $805.9 million, but comparable sales declined 1%. Men's delivered its fourth consecutive quarter of positive comps. Women's fashion bottoms and newer denim fits gained traction, though the company is still rebalancing older and seasonal inventory.
American Eagle's Margins Get Refund Boost

Gross profit climbed 34.4% year over year to $672.1 million, while gross margin expanded 980 basis points to 48.7%. A net $179 million tariff-refund benefit in gross profit contributed 1,300 basis points to the margin expansion. Merchandise margins deleveraged 330 basis points, with Aerie improvement offset by American Eagle markdowns.

Selling, general and administrative expenses increased 19.3% to $408.4 million and rose 290 basis points as a percentage of sales to 29.6%.

Operating income rose 105.1% year over year to $211.4 million, while operating margin increased 730 basis points to 15.3%. The quarter included a $161 million net operating-income benefit from tariff refunds.

American Eagle's Balance Sheet Shows Inventory Build

AEO ended the quarter with $148 million in cash and cash equivalents. Total liquidity, including the revolver, was $783 million. Merchandise inventory was $817.9 million, up 13.9% year over year, while units increased 9%. Management said the higher inventory cost included the impact of incremental tariffs.

The company also returned $21 million to shareholders through its quarterly cash dividend of 12.5 cents per share.

American Eagle's Outlook Includes Refunds

For fiscal 2026, the company expects comparable sales to increase in the mid-single digits and gross margin to rise year over year. SG&A expenses are projected to grow in the low-double digits, while depreciation and amortization is expected at about $215 million. Operating income is forecast between $540 million and $550 million, inclusive of tariff-refund benefits.

For the fiscal third quarter, AEO expects comparable sales growth in the mid-to-high single digits. Management sees Aerie and OFFLINE comps in the high teens to 20% range, while American Eagle is expected to be approximately flat.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -12.5% due to these changes.

VGM Scores

Currently, American Eagle has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock has a grade of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, American Eagle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

American Eagle is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, Urban Outfitters (URBN Quick QuoteURBN - Free Report) , a stock from the same industry, has gained 7.1%. The company reported its results for the quarter ended July 2026 more than a month ago.

Urban Outfitters reported revenues of $1.66 billion in the last reported quarter, representing a year-over-year change of +10.4%. EPS of $1.72 for the same period compares with $1.58 a year ago.

For the current quarter, Urban Outfitters is expected to post earnings of $1.54 per share, indicating a change of +20.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Urban Outfitters. Also, the stock has a VGM Score of A.