American Eagle Outfitters Inc. AEO, a specialty retailer of casual apparel, accessories and footwear, is slated to report fourth-quarter fiscal 2014 results on Mar 4. In the last quarter, the company’s earnings were in line with the Zacks Consensus Estimate of 22 cents per share. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Though results were not very impressive, American Eagle managed to get over the holiday season pressure by efficiently managing inventories and offering fewer discounts that led to better-than-expected margins. Despite a drop in overall comps for the holiday period, the company delivered positive comps in December on the back of lesser promotions and its well accepted fresh assortments.
Following its better-than-expected holiday sales results, American Eagle upgraded its earnings projection for the fourth quarter. Management now envisions earnings to range from 32–34 cents a share, up from 30–33 cents projected earlier, representing 19%–26% year-over-year growth.
However, fourth-quarter results might be slightly impacted by cautious consumer spending and a challenging retail environment during the holiday season. Hence, we remain a little cautious about the company’s upcoming results.
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 34 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 0.00% ESP 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 to post an earnings beat:
Kroger Co. KR has an Earnings ESP of +6.74% and a Zacks Rank #2.
PetSmart Inc. PETM has an Earnings ESP of +1.46% and a Zacks Rank #2.
Zumiez Inc. ZUMZ has an Earnings ESP of +1.27% and a Zacks Rank #2.
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