Strength Seen in American Eagle (AEO): Can Its 8.9% Jump Turn into More Strength?

Zacks Equity Research
·2 min read

American Eagle Outfitters (AEO) shares ended the last trading session 8.9% higher at $27.69. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 6.3% gain over the past four weeks.

Shares of American Eagle jumped after the company posted better-than-anticipated fourth-quarter fiscal 2020 results. The company continued to witness robust digital sales. Management was particularly impressed by the performance of the Aerie brand, which benefited from the OFFLINE activewear brand. Also, management is optimistic of a strong first-quarter fiscal 2021, with revenue and operating income expected to surpass the first-quarter level of both 2020 and 2019.

The company reported adjusted earnings of $0.39 per share that beat the Zacks Consensus Estimate of $0.36. Total revenues of $1,292.3 million surpassed the Zacks Consensus Estimate of $1,284 million.

Price and Consensus

Price Consensus Chart for American Eagle
Price Consensus Chart for American Eagle

This teen clothing retailer is expected to post quarterly earnings of $0.33 per share in its upcoming report, which represents a substantial year-over-year growth. Revenues are expected to be $1,077 million, up 21.9% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For American Eagle, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on AEO going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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