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Will American Eagle (AEO) Miss Earnings?

Zacks Equity Research

American Eagle Outfitters Inc. (AEO), the global specialty retailer, is slated to report its fourth-quarter and fiscal 2013 results on Mar 11, 2014. In the last quarter, it posted a positive surprise of 5.6%. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

Though American Eagle delivered better-than-expected third-quarter fiscal 2013 earnings results, on a year-ago comparable basis earnings declined substantially due to lower sales and weak merchandise margins, partially offset by effective cost management. Sales bottomed on account of lower average unit retail and average dollar sale. Stiff competition, an intense promotional retail backdrop and lower traffic were the other headwinds. Comparable store sales disappointed based on negative comps at its segments, offset by comps improvement at AEO Direct.

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: ESP (Expected Surprise Prediction) for American Eagle is 0.00% since the Most Accurate estimate stands at 26 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #4 (Sell): American Eagle’s Zacks Rank #4 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements:

Tiffany & Co. (TIF) Earnings ESP stands at +0.66% and it carries a Zacks Rank #3 (Hold).

Foot Locker Inc. (FL) with an Earnings ESP of +9.33% holds a Zacks Rank #3 (Hold).

Dick’s Sporting Goods Inc. (DKS) has an Earnings ESP of +0.91% and a Zacks Rank #3 (Hold).

Read the Full Research Report on AEO
Read the Full Research Report on FL
Read the Full Research Report on TIF
Read the Full Research Report on DKS

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