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On Friday, CFRA analysts downgraded American Eagle Outfitters (NYSE:AEO) stock on the New York Stock Exchange from Buy to Hold. The decision comes with a revised price target of $10, down from a previous target of $7. The adjustment reflects the company’s performance in the first quarter and anticipated challenges in the apparel and footwear market. According to InvestingPro data, the stock appears undervalued, despite falling over 42% in the past six months. Eight analysts have recently revised their earnings expectations downward for the upcoming period.
American Eagle Outfitters reported a normalized first-quarter earnings per share (EPS) of -$0.29, falling short of the consensus estimate by $0.07. Revenue for the quarter was $1.09 billion, which was $5 million below expectations. The company’s Aerie brand saw a 4% decline in comparable sales, while the American Eagle brand experienced a 2% decrease. With a current market capitalization of $1.76 billion and a P/E ratio of 9.8, the company maintains a "GOOD" Financial Health score on InvestingPro.
The first quarter also saw a significant compression in gross margin, which dropped by 1100 basis points year-over-year to 29.6%. This decline was attributed to inventory write-downs, increased in-season markdowns, and rising product costs. Despite these challenges, the company is moving forward with its accelerated share buyback program, aiming to complete a $200 million buyback in the second quarter, representing approximately 9% of its fully diluted outstanding shares. The company maintains a notable 4.93% dividend yield and has sustained dividend payments for 22 consecutive years.
CFRA analysts have adjusted their earnings expectations for American Eagle Outfitters, lowering the EPS estimates for fiscal year 2026 by $0.75 to $0.75 and for fiscal year 2027 by $0.20 to $1.55. The firm cites slower-than-expected earnings recovery due to higher promotional activity and reduced demand in the U.S. apparel and footwear sub-industry.
The downgrade and revised price target reflect the current challenges faced by American Eagle Outfitters, as the company navigates a competitive market environment with evolving consumer preferences.
In other recent news, American Eagle Outfitters reported a first-quarter adjusted loss per share of $0.29, missing the analyst forecast of $0.11. The company’s revenue reached $1.1 billion, slightly surpassing the expected $1.08 billion. Despite the revenue beat, the earnings miss led to a stock decline of 7.87% in after-hours trading. UBS analyst Jay Sole maintained a Buy rating on American Eagle, with a price target of $19, citing the potential for growth in annual earnings per share at a low double-digit percentage. Sole remains confident in the brand’s long-term growth trajectory and strategic adjustments.
Conversely, Citi analyst Paul Lejuez reduced the stock’s price target from $12 to $11 while maintaining a Neutral rating, pointing to a challenging first quarter marked by a 5% sales decline and a $75 million inventory writedown. Lejuez highlighted the company’s ongoing challenges, including a projected decline in comparable sales and gross margin for the second quarter. American Eagle also faces a looming tariff burden estimated at $40 million in the second half of the year. These developments reflect a cautious outlook for the company’s stock performance in the near term.
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