American Eagle Outfitters, Inc. AEO remains focused on strengthening its product assortments by adding more compelling brands, managing inventory levels diligently and improving its eCommerce business. Moreover, it remains committed toward enhancing store sales by rationalizing its brick-and-mortar store fleet that includes closing underperforming stores.
Further, the company possesses strong fundamentals, given its rewards program and strategic store expansion plans. Also, American Eagle has been constantly undertaking initiatives to reduce costs through supply chain efficiencies and its updated product allocation system. These efforts are expected to help the company augment its bottom line. The stock has a long-term earnings growth rate of 10%, which highlights its inherent strength. We believe that American Eagle offers a sound investment opportunity.
American Eagle appears compelling from the earnings perspective. This specialty retailer of casual apparel, accessories and footwear registered positive earnings surprises in the past five quarters. In the trailing four quarters, the Pittsburgh, PA-based company outperformed the Zacks Consensus Estimate by an average of 15.8%, including a positive surprise of 2.4% delivered in the fourth quarter of fiscal 2015.
American Eagle reported robust fourth-quarter results, wherein earnings of 42 cents a share increased 17% year over year and beat the Zacks Consensus Estimate by a penny. Results benefited from the company’s merchandise-related initiatives as well as actions taken to improve operational performance. Further, results gained from solid growth at its American Eagle brand and better-than-expected performance at the Aerie brand.
Conclusion
The above analysis makes it apparent that American Eagle deserves a place in your portfolio. How the year 2016 will unfold for equity investors is hard to predict, but making your portfolio resilient to any unforeseen event by adding stocks with strong fundamentals is the wisest thing to do. Better be prepared now than be sorry later.
American Eagle shares space with Express Inc. EXPR, Shoe Carnival Inc. SCVL and Abercrombie & Fitch Co. ANF.
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