Rising earnings estimates on the back of strong second quarter
results - including an average earnings surprise of 2.9% over the
last four quarters - helped
American Eagle Outfitters
(
AEO
) achieve a Zacks #1 Rank (Strong Buy) on September 4, 2012.
Moreover, this Pennsylvania-based fashion retailer has a solid
year-to-date return of 32.3%, and with several positive catalysts,
the stock looks poised to keep the winning streak going.
The Rank Driver
Robust second-quarter 2012 results, improved 2012 guidance,
impressive track record of paying regular dividends, and strategies
to grow internationally, are the primary rank drivers for this
stock.
On August 22, 2012, American Eagle reported robust
second-quarter 2012 financial results, driven by strong top-line
growth coupled with lower input and operating costs. Quarterly
earnings of 21 cents per share for second-quarter 2012 surged
nearly 62% from the comparable year-ago period, and came in line
with the Zacks Consensus Estimate. In the quarter, American Eagle's
adjusted net sales went up 11% year over year to $739.7 million,
beating the Zacks Consensus Estimate of $738 million.
Bolstered by a strong quarterly performance, management raised
its fiscal 2012 earnings guidance range to $1.33-$1.36 per share
from $1.16-$1.22 forecasted earlier. The improved guidance range is
based on the company's expectation of mid-single-digit and low-sing
digit growth in comparable store sales for the third and fourth
quarter of fiscal 2012.
Recently, on September 12, 2012, American Eagle announced a
special cash dividend of $1.50 per share along with its regular
quarterly cash dividend of 11 cents per share. The company boasts
of a long track record of consistently paying quarterly dividend
for more than 8 years. The announcement of special cash dividend
was primarily aided by the company's strong balance sheet position
and ability to generate excessive free cash flow.
Moreover, American Eagle continue to gain pace as it takes
another step forward towards growing internationally. After making
its presence felt in Israel, Japan and the Middle East, the company
targets to capture the strong and promising Philippines market. On
September 6, 2012, the company entered into a multi-year retail
license agreement with the Philippines based Suyen Corporation.
All the above discussed points demonstrate the company's strong
fundamentals and its ability to keep up with the momentum. As a
result, this stock offers several reasons to own it.
Earnings Estimate Revisions
For fiscal 2012, the Zacks Consensus Estimate went up by 10.6%
to $1.36 per share from $1.23 over the last 60 days. For fiscal
2013, the Zacks Consensus Estimates improved 7% to $1.52 per share
from $1.42 over the same time frame.
Valuation
American Eagle currently trades at a forward P/E of 15.28x, a
11.2% premium to the peer group average of 13.74x. Also, on a
price-to-book basis, the shares are trading at 2.76x, a 19.0%
premium to the peer group average of 2.32x. Given the company's
strong fundamentals, the premium valuation is justified.
American Eagle has a trailing 12-month Return on Investment
(ROI) of 14.2% compared with the peer group average of 14.1%.
About the Company
Based in Pittsburgh, Pennsylvania, American Eagle Outfitters
Inc. is a specialty retailer of casual apparel, accessories, and
footwear for men and women between the age group of 15 and 25. The
company's assortment includes jeans, cargo pants, and graphic
T-shirts, as well as accessories, outerwear, and footwear. American
Eagle has a market capitalization of about $4.09 billion.
Other Zacks #1 Rank retail stocks include
Hain Celestial Group Inc.
(
HAIN
) and
Dillards Inc.
(
DDS
).
AMER EAGLE OUTF (AEO): Free Stock Analysis
Report
DILLARDS INC-A (DDS): Free Stock Analysis
Report
HAIN CELESTIAL (HAIN): Free Stock Analysis
Report
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