American Eagle Outfitters Set to Report Modest Growth in Q3 Fiscal 2024

American Eagle Outfitters, Inc. (AEO) is anticipated to showcase revenue growth when it releases its third-quarter fiscal 2024 results on December 4. Analysts expect revenues to reach $1.30 billion, reflecting a 0.3% increase compared to the previous year.

The estimated earnings stand at 46 cents per share, demonstrating a drop of 6.1% from the last year’s quarter. Over the last month, the earnings consensus has adjusted downward by a penny.

In the most recent quarter, American Eagle exceeded earnings expectations by 2.6%. On average, it has delivered a 12% earnings surprise over the last four quarters.

Keep track of quarterly reports: Check out Zacks Earnings Calendar.

Factors Influencing AEO’s Third-Quarter Performance

American Eagle’s performance in the third quarter is likely attributed to sustained brand popularity and strong demand, spurred by appealing products and effective marketing strategies. An increase in demand for its top brands, along with efforts to expand into new markets, has positively impacted revenue. The company’s focus on innovation, robust omnichannel sales, and streamlined inventory management have further contributed to its success.

Additionally, AEO’s initiatives aimed at cost reduction, a strong showing from its Aerie brand, and solid online sales remain crucial driving forces. Aerie is gaining momentum, particularly in core apparel, activewear, and intimates. The flagship American Eagle brand has also seen steady performance, especially in tops, skirts, dresses, and shorts. Anticipated sales growth stands at 1% for American Eagle and 0.7% for Aerie in the fiscal third quarter.

American Eagle continues to execute its Powering Profitable Growth plan, focusing on brand enhancement, operational optimization, and financial discipline. Management’s initiatives to improve profitability suggest improved performance in upcoming reports.

During its last earnings call, management projected operating income between $120-$125 million. Our estimate indicates $122.9 million. AEO anticipates comparable sales growth of 3-4%, with total revenue expected to be steady or slightly increase due to the retail calendar. SG&A expenses are likely to maintain leverage due to efficiencies in key areas. We project a 3.2% rise in comparable sales and a 0.5% increase in overall revenue for the same quarter.

Despite this, AEO faces challenges from a difficult operating environment marked by inflation pressures and shifting consumer spending habits. Rising corporate expenses, including compensation and incentives, could further weigh on profitability.

Zacks Model Insights for AEO

Current analysis suggests that an earnings beat for American Eagle is uncertain this quarter. While a favorable combination of a positive Earnings ESP and certain Zacks Ranks can enhance the likelihood of an earnings beat, AEO does not meet these criteria now. For the latest stocks likely to perform well before announcements, you can utilize our Earnings ESP Filter.

At present, American Eagle has an Earnings ESP of -0.62% and carries a Zacks Rank of 3.

American Eagle Outfitters Stock Performance Overview

American Eagle Outfitters, Inc. Price and EPS Surprise | American Eagle Outfitters, Inc. Quote

AEO’s Valuation Insights

From a valuation perspective, American Eagle’s shares are currently attractive, trading at a notable discount compared to historical and industry standards. The company has a forward 12-month price-to-earnings ratio of 9.76X, lower than its five-year median of 12.33X and the Retail-Apparel & Shoes industry average of 17.19X. This creates a compelling value proposition for investors interested in this sector. Moreover, AEO has a Value Score of A, enhancing its appeal further.

Other Notable Stocks with Earnings Potential

The following companies show promising characteristics that could lead to earnings success this season:

Torrid Holdings (CURV) currently holds an Earnings ESP of +23.08% with a Zacks Rank of 2. Forecasted revenues for CURV are $2.8 billion, indicating 2.7% growth from the prior year.

This past month, CURV’s earnings consensus has increased by a penny to 3 cents per share, suggesting a remarkable 200% increase year-over-year.

Dollar Tree (DLTR) presently has an Earnings ESP of +2.80% and a Zacks Rank of 3. The company is expected to show growth in both revenue and earnings with a consensus revenue of $7.5 billion, up 1.9% from last year.

Dollar Tree’s earnings consensus has also ticked up by a penny to $1.07 per share, reflecting a 10.3% increase from the same quarter last year.

lululemon athletica (LULU) has an Earnings ESP of +0.25% with a Zacks Rank of 3. The forecast for LULU’s revenue is $2.4 billion, indicating a 6.8% increase compared to the previous year.

The earnings estimate for LULU remains steady at $2.73 per share, representing a 7.9% rise from last year.

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