What Falling Estimates & Price Mean for American Eagle (AEO) - Tale of the Tape

By
A A A

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is American Eagle Outfitters, Inc. ( AEO ), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in AEO.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 15 estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from 87 cents a share a month ago to its current level of 64 cents.

Also, for the current quarter, American Eagle has seen 12 downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to breakeven from 13 cents over the past 30 days.  

The stock also has seen some pretty dismal trading lately, as the share price has dropped 10.5% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don't have a long time horizon to wait.

If you are still interested in the apparel-shoe sector, you may instead consider some better-ranked stocks including American Apparel, Inc. ( APP ), Foot Locker, Inc. ( FL ) and H & M Hennes & Mauritz AB (publ) ( HNNMY ). All these stocks hold a Zacks Rank #2 (Buy) and may be better selections at this time.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>


AMER EAGLE OUTF (AEO): Free Stock Analysis Report

AMER APPAREL (APP): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

HENNES&MAURIT (HNNMY): Get Free Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: AEO , APP , FL , HNNMY

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

73%
100%
67%

Most Active by Volume

106,679,460
  • $17.03 ▲ 0.47%
101,357,777
  • $38.65 ▼ 5.57%
61,830,117
  • $89.89 ▼ 4.26%
54,116,071
  • $5.11 ▼ 4.49%
50,121,934
  • $101.06 ▲ 0.10%
49,993,927
  • $3.52 ▼ 1.40%
47,717,687
  • $11.44 ▼ 4.67%
44,793,169
  • $99.05 ▼ 0.93%
As of 9/22/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com