Earnings Estimates Moving Higher for American Eagle (AEO): Time to Buy?
American Eagle Outfitters (AEO) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
The upward trend in estimate revisions for this teen clothing retailer reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For American Eagle, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $0.26 per share, which is a change of +52.94% from the year-ago reported number.
The Zacks Consensus Estimate for American Eagle has increased 27.06% over the last 30 days, as five estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $1.71 per share represents a change of +12.5% from the year-ago number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, seven estimates have moved up for American Eagle versus no negative revisions. This has pushed the consensus estimate 13.22% higher.
Favorable Zacks Rank
The promising estimate revisions have helped American Eagle earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for American Eagle have attracted decent investments and pushed the stock 5.9% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
