American Eagle Rises 4% As 4Q Results Outperform, Street Is Bullish

Shares of American Eagle Outfitters were up 3.8% in Thursday’s pre-market trading session after the lifestyle, clothing, and accessories retailer reported 4Q results that topped Street estimates.

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American Eagle (AEO) reported 4Q earnings of $0.39 per share, which rose 5.4% year-over-year and beat consensus estimates of $0.36 per share. Adjusted operating income increased 38% year-over-year, reflecting gross margin expansion across all brands.

Revenues of $1.29 billion beat analysts’ expectations of $1.28 billion, but declined 2% year-over-year due to a 1% decline in comparable-store sales. While Aerie revenue surged 25% year-on-year to $337 million, American Eagle revenue decreased 9% to $943 million in 4Q. The company’s digital revenues increased 35%. However, store revenues declined 20% due to lower mall traffic and store closures related to the COVID-19 pandemic.

The company’s CEO Jay Schottenstein said, “We see significant opportunity to drive Aerie’s growth and deliver strong profit margins in the coming years.” (See American Eagle stock analysis on TipRanks)

On Feb. 24, Cowen & Co. analyst Oliver Chen upgraded the stock to Buy from Hold and raised the price target to $31 (22% upside potential) from $25. In a note to investors, the analyst said that he expects Aerie business to reach $2 billion over the next 3 years. Chen further expects the American Eagle brand’s performance to stabilize “on merchandise and methodical store rationalization”.

Overall, the rest of the Street has a bullish outlook on the stock, with a Strong Buy consensus rating based on 9 Buys and 2 Holds. The average analyst price target of $27.91 implies upside potential of about 10% to current levels. Shares have rallied by about 96% over the past year.