American Eagle Outfitters stock sees steady 4Q comps, driven by Aerie growth

On Wednesday, Citi analyst Paul Lejuez maintained a Neutral rating on American Eagle Outfitters (NYSE:AEO) shares with a steady price target of $21.00. In his commentary, Lejuez highlighted that American Eagle is tracking a 2% increase in comparable sales for the fourth quarter, which is slightly above the previously guided 1%.

This growth is attributed to a mid-single-digit comp at Aerie and a marginally positive comp at American Eagle. The company, with a market capitalization of $3.06 billion, has demonstrated solid revenue growth of 6.38% over the last twelve months, according to InvestingPro data.

Management now anticipates fourth-quarter EBIT to reach $135 million, surpassing the earlier forecast of $125-130 million. The company's leadership expressed confidence about the holiday season, noting reduced promotions compared to the previous year and stable performance during the peak holiday period.

They also conveyed a positive outlook on sales growth potential for both Aerie, with its soft dressing and OFFLINE by Aerie products, and American Eagle, focusing on men's improvements and building on women's momentum. InvestingPro analysis reveals that four analysts have recently revised their earnings estimates upward for the upcoming period, supporting management's optimistic outlook.

Despite the company's optimism about expanding margins by fiscal year 2025, the market has shown skepticism, as reflected in the recent weakness of the stock. Nevertheless, management is expected to set fiscal year 2025 guidance in line with their long-term targets of 3-5% sales growth, aligning with the consensus estimate of a 3% increase.

American Eagle shares are currently trading at approximately 8 times Citi's fiscal year 2025 earnings estimate of $1.87 per share. This valuation indicates that the market has already factored in considerable negativity at the current share price levels.

In other recent news, American Eagle Outfitters has raised its fourth-quarter operating profit outlook to approximately $135 million, up from the previously anticipated range of $125 million to $130 million. This increase is attributed to stronger-than-expected holiday sales, with comparable sales in the low single digits surpassing the initial forecast of a 1% increase. The company has also been active in share repurchases, buying back 1.5 million shares in the fourth quarter.

In terms of analyst evaluation, Raymond (NS:RYMD) James initiated coverage on the retailer with a Market Perform rating, projecting earnings per share of $1.69 and $1.82 for fiscal years 2024 and 2025 respectively. Morgan Stanley (NYSE:MS) maintained an Underweight rating but reduced the stock's price target to $15.00, citing concerns about gross margin performance. BMO Capital Markets also adjusted its outlook on American Eagle, reducing the price target to $20.00 while maintaining a Market Perform rating, due to inconsistency in the company's digital sales.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.