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American Eagle Q2 Preview: Can Shares Snap Downtrend?

·3 min read

The Zacks Retail and Wholesale Sector has been hit hard in 2022, down more than 20% and widely underperforming the S&P 500.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

A famous company residing in the sector, American Eagle Outfitters AEO, is on deck to unveil Q2 results on September 7th after market close.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories, and footwear for men and women aged 15–25.

Currently, the company carries an unfavorable Zacks Rank #5 (Strong Sell) with an overall VGM Score of a D. How does everything shape up for the retailer heading into the print? Let’s take a closer look.

Share Performance & Valuation

It’s been a brutal stretch in 2022 for American Eagle shares, down more than 50% and coming nowhere near the general market’s performance.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Over the last three months, AEO shares have continued to lag the general market, down 6%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

However, AEO shares trade at solid valuation levels, with its 0.4X forward P/S ratio residing nicely beneath its five-year median of 0.8X and representing a sizable 69% discount relative to its Zacks Sector.

American Eagle Outfitters carries a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been overwhelmingly bearish in their earnings outlook over the last 60 days, with five negative estimate revisions hitting the tape. The Zacks Consensus EPS Estimate of $0.14 reflects a steep 76% drop-off in quarterly earnings Y/Y.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Still, the company’s top-line appears to be in better shape – the Zacks Consensus Sales Estimate of $1.2 billion pencils in a marginal 1% year-over-year uptick.

Quarterly Performance & Market Reactions

American Eagle Outfitters has primarily reported bottom-line results above expectations, exceeding the Zacks Consensus EPS Estimate in seven of its previous ten quarters. However, in its latest report, AEO fell short of bottom-line expectations by 33%.

Top-line results have primarily been mixed – AEO has exceeded top-line estimates in half its previous ten quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

For day-traders who prefer to play the long side, beware – shares have moved downwards following back-to-back prints, both by at least 3.5%.

Putting Everything Together

AEO shares have widely lagged the general market year-to-date and over the last month, indicating that sellers have been in control.

The company carries solid valuation levels, further displayed by its Style Score of a B for Value.

Analysts have been bearish in their earnings outlook, and estimates reflect a decrease in earnings but an uptick in revenue – a reflection of margin compression.

Further, the company has consistently exceeded bottom-line estimates, but revenue results have been primarily mixed over its last ten releases.

Heading into the print, American Eagle Outfitters AEO carries a Zacks Rank #5 (Strong Sell) with an Earnings ESP Score of -2.7%.


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