American Eagle Outfitters Inc. AEO is scheduled to report third-quarter fiscal 2015 results on Dec 2. Last quarter, this specialty retailer of casual apparel, accessories and footwear posted a positive earnings surprise of 21.4%. Let's see how things are shaping up for this announcement.
Factors Influencing the Upcoming Results
After a splendid performance in the first half of fiscal 2015 backed by strong sales and earnings growth delivered by both the American Eagle and Aerie brands, American Eagle is optimistic about its third-quarter results as reflected by its guidance. The company projects earnings per share in the band of 28–37 cents compared with 22 cents earned in the prior-year quarter.
However, the company anticipates comps growth at a mid single-digit rate in the third quarter, which represents a slowdown from 11% growth delivered in the preceding quarter.
Nevertheless, we believe that plans to expand globally along with omni-channel growth will enable the company to improve its business and efficiently cater to international demand. Also, American Eagle’s average positive surprise of 15.9% represents an encouraging earnings picture.
Earnings Whispers?
Our proven model does not conclusively project an earnings beat for American Eagle this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
Zacks ESP: ESP for American Eagle is 0.00% since both the Most Accurate estimate and Zacks Consensus Estimate are poised at 34 cents per share.
Zacks Rank: American Eagle’s Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise. Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is undergoing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat:
Casey's General Stores Inc. CASY has an Earnings ESP of +2.08% and a Zacks Rank #1 (Strong Buy).
Costco Wholesale Corporation COST has an Earnings ESP of +2.59% and a Zacks Rank #3 (Hold).
Restoration Hardware Holdings Inc. RH has an Earnings ESP of +1.59% and a Zacks Rank #3.
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