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Will Robust Comps Drive American Eagle (AEO) Earnings in Q4?

American Eagle OutfittersAEO is slated to report fourth-quarter fiscal 2017 results on Mar 8, before the closing bell. Notably, the company has a mixed record of surprises in the trailing four quarters, with an average earnings beat of 2.6%.

For the impending quarter, the Zacks Consensus Estimate remained stable at 44 cents in the last 30 days, reflecting a year-over-year improvement of 12.8%. The company envisions fourth-quarter earnings per share in the range of 42-44 cents.

American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise

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

Let's see how things are shaping up prior to the earnings announcement.

Factors Likely to Impact 4Q17

American Eagle has been the beneficiary of robust holiday sales season this year, backed by favorable economic scenario and heightened consumer spending. Consequently, the company posted solid comparable store sales (comps) growth in fourth-quarter fiscal 2017 through Jan 8, which mainly comprises holiday sales. Comps rose 8% for the period.

In fact, the company has been posting positive comps for 11 straight quarters. Furthermore, the company's performance in the above-mentioned period reflected sustained momentum in the fourth quarter, which drove better-than-expected Black Friday and Cyber Monday sales.

Moreover, American Eagle's success in the holiday season can be attributed to record sales and strong momentum at its AE and Aerie brands. The company also benefited from solid online and in-store traffic as customers responded positively to its merchandising offerings.

Meanwhile, American Eagle is striving to develop its omni-channel platform to reach customers in every possible manner. In this regard, the company has been improving its website as well as mobile app. Backed by these efforts and efficient digital marketing endeavors, American Eagle's e-commerce sales contributed about 25% to total revenues in third-quarter fiscal 2017. Also, the quarter witnessed sequential improvements in sales and profit margins, which are expected to continue in the fiscal fourth quarter.

Additionally, management remains committed toward enhancing store sales by rationalizing its brick and mortar store fleet that includes closing underperforming stores and expanding the profitable ones. Also, it has been continuously undertaking initiatives to reduce costs through supply chain efficiencies and product allocation system. Moving ahead, we believe that these strategic initiatives are likely to drive the company's top line and overall profitability.

Notably, analysts polled by Zacks anticipate revenues of $1,198 million, up 9.2% from the year-ago quarter.

All these initiatives have helped the stock to outperform the industry as well. In the last six months. Shares of the company have surged a whopping 63.6% compared with the industry 's rally of 27.9%.

What the Zacks Model Unveils

Our proven model shows that American Eagle is likely to beat earnings estimates this quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

American Eagle has an Earnings ESP of +0.53% and a Zacks Rank #1, making us reasonably confident of an earnings beat.

Other Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Dollar General Corporation DG has an Earnings ESP of +2.88% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Zumiez Inc. ZUMZ has an Earnings ESP of +0.56% and a Zacks Rank of 2.

Dollar Tree, Inc. DLTR has an Earnings ESP of +1.41% and a Zacks Rank #2.

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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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