American Eagle Outfitters, Inc. (AEO), a specialty retailer of casual apparel, accessories and footwear, is slated to report third-quarter fiscal 2014 results on Dec 4. In the last quarter, it had posted earnings of 3 cents a share, above the Zacks Consensus Estimate of break-even. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
American Eagle is focused on strengthening its product assortments, adding more compelling brands, managing inventory levels diligently and augmenting its eCommerce business. Moreover, it remains committed to enhance store sales productivity by rationalizing its brick-and-mortar store fleet that includes closing underperforming stores and expanding profitable ones. However, a competitive retail landscape and the dismal comparable-store sales performance remain matters of concern.
Earnings Whispers?
Our proven model does not conclusively show 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, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for American Eagle is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 22 cents.
Zacks Rank: American Eagle carries a Zacks Rank #2 (Buy). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements:
Nike, Inc. (NKE) has an Earnings ESP of +1.45% and a Zacks Rank #2.
Casey's General Stores, Inc. (CASY) has an Earnings ESP of +6.25% and a Zacks Rank #2.
Carnival Corporation (CCL) has an Earnings ESP of +21.05% and a Zacks Rank #2.
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