American Eagle Outfitters(AEO) ZACKS·2025-03-07 18:30Core Viewpoint - American Eagle Outfitters, Inc. (AEO) is expected to report a decline in both revenues and earnings for the fourth quarter of fiscal 2024, with a consensus estimate of 1.61 billion, indicating a 4.3% decline from the prior year's figure [2] - The earnings consensus is set at 50 cents per share, down 18% from 61 cents reported in the same quarter last year [2] - In the last reported quarter, AEO's earnings exceeded the consensus estimate by 4.4%, with an average earnings surprise of 12.6% over the last four quarters [3] Sales and Profitability - Comparable sales for the fourth quarter-to-date through January 4, 2025, increased in low-single digits, surpassing the earlier outlook of positive 1% [6] - The company anticipates an operating profit of nearly 125-$130 million [6] - AEO's strategic initiatives are expected to support improved profitability compared to prior projections [5][8] Strategic Initiatives - AEO is implementing its "Powering Profitable Growth" plan, focusing on amplifying brands, optimizing operations, and maintaining financial discipline [8] - The company is committed to cost management and operational efficiency, which are expected to positively impact fourth-quarter results [7][10] Market Position and Valuation - AEO's shares are trading at a forward 12-month price-to-earnings ratio of 6.80, below the five-year median of 12.36 and the industry average of 16.94, indicating an attractive investment opportunity [12] - The stock currently holds a Value Score of A, further validating its appeal to investors [12] Challenges - AEO has faced higher markdowns and increased costs related to buying, occupancy, and warehousing, which are expected to negatively impact margins in the upcoming quarter [9] - The company anticipates comparable sales growth of about 2% for the fourth quarter, a decrease from the 8% rise in the prior year [7][11]