Earnings Preview: American Eagle - Analyst Blog

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American Eagle Outfitters Inc . ( AEO ) is scheduled to report its third-quarter 2011 financial results before the opening bell on November 30, 2011. The current Zacks Consensus Estimate for the quarter is earnings of 27 cents a share. For the quarter under review, revenue is expected to be 819.0 million, according to the Zacks Consensus Estimate.

Second-Quarter 2011 Synopsis

American Eagle's earnings in the second quarter decreased to 10 cents per share from its year-ago earnings of 13 cents per share, missing the Zacks Consensus Estimate of 11 cents a share. During the quarter, American Eagle's net sales went up 4.0% year over year to $676.0 million, still below the Zacks Consensus Estimate of $770 million. Same-store sales came in flat for the quarter.

Zacks Consensus

The analyst covered by Zacks expects American Eagle to post third-quarter 2011 earnings of 27 cents a share, which is lower than earnings of 29 cents delivered in the prior-year quarter. The current Zacks Consensus Estimate ranges between earnings of 26 cents and 28 cents a share.

For fiscal 2011, the Zacks Consensus Estimate stood at 90 cents per share, lower than the previous fiscal earnings of $1.02. The current Zacks estimate ranges between 81 cents and 95 cents a share.

Agreement of Estimate

For the third quarter of fiscal 2011, out of 27 analysts covering the stock, 18 analysts revised their estimates upward, while none have revised in the opposite direction in the last 30 days. For full fiscal 2011, 20 analysts revised their estimates in positive direction in the last 30 days.

In the last 7 days, no movement in estimates has been noticed in either direction either for third-quarter 2011 or fiscal 2011.

The company has recorded a robust growth of 7% in October 2011 same-store sales (including AEO direct), which prompted management to revise their earnings guidance range. In the third quarter of fiscal 2011, the company now expects to earn in the range of 26 cents to 27 cents per share, up from its previous range of 22 cents to 27 cents. Moreover, in fiscal 2011, the company is anticipating earnings to be between 85 cents and 95 cents per share.

Considering the revision in guidance range, analysts have also revised their estimates in upward direction.

Magnitude of Estimate Revisions

With heavy positive affect from earnings revisions by analysts in the last 30 days, the Zacks Consensus Estimates for third-quarter 2011 has increased by 3 cents to 27 cents per share while for fiscal 2011 it increased by 4 cents to 90 cents per share.

Surprise History

With respect to earnings surprises, American Eagle showed a mixed trend in the last four quarters. The company has recorded negative surprises two times in the trailing four quarters with a low of negative 9.1% and a high of positive 2.3%. On an average, the earnings surprise was a negative 4.6%.

Our View

We remain impressed with the company's continued momentum in denim along with improved merchandise assortments in the women's business segment, which will likely lead to a turnaround in its top line as well as a rebound in gross margin.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other teenage-focused retailers, such as Abercrombie & Fitch Co. ( ANF ) and Gap Inc. ( GPS ).

We currently have a short-term Zacks #2 Rank (Buy) and a long-term Neutral recommendation on the stock.

AMER EAGLE OUTF ( AEO ): Free Stock Analysis Report

ABERCROMBIE ( ANF ): Free Stock Analysis Report

GAP INC ( GPS ): Free Stock Analysis Report

Zacks Investment Research

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

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

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