American Eagle Outfitters Inc. AEO is scheduled to report fourth-quarter fiscal 20Array5 results on Mar 2. Last quarter, this specialty retailer of casual apparel, accessories and footwear posted a positive earnings surprise of 2.9%. Let's see how things are shaping up for this announcement.
Factors Influencing the Upcoming Results
American Eagle has been strengthening its global presence for some time now after witnessing strong profitability at its overseas licensed stores, with little capital requirements. In line with this strategy, the company recently expanded its presence in the APAC region with the opening of new stores in South Korea and Singapore.
Last month, American Eagle reported lower-than-expected comparable store sales (comps), which mainly comprised holiday sales results. However, management claims that the holiday season was solid, backed by strong sales results at both its brands. Further, the company is pleased with its online business, which delivered a strong performance, driven by efficient use of its omni-channel capabilities to enhance customer experience.
Given the trend so far, the company reiterated its fourth-quarter earnings guidance of 40–42 cents per share compared with 36 cents earned in the prior-year quarter. Also, the company is encouraged with the progress made in 20Array5 and anticipates delivering annual EPS growth of nearly 70%.
Still, fourth-quarter results might be slightly impacted by cautious consumer spending and a challenging retail environment.
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 #Array, 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 4Array cents per share.
Zacks Rank: American Eagle’s Zacks Rank #3 (Hold) increases the predictive power of the 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 or 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 +Array0.ArrayArray% and a Zacks Rank #2.
The Kroger Co. KR has an Earnings ESP of +Array.85% and a Zacks Rank #2.
Big Lots Inc. BIG has an Earnings ESP of +0.5Array% and a Zacks Rank #3 (Hold).
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