American Eagle Earnings Just Aren't Enough for Investors

Retail

Published: August 17, 2016 9:15 am

Last Updated: January 13, 2020 4:32 am

American Eagle Outfitters Inc. (NYSE: AEO) reported its fiscal second-quarter financial results before the markets opened on Wednesday. The company watched its shares pull back after the release of the report despite results topping estimates in both earnings and guidance. The stock had risen nearly 25% this year, excluding this move. Although this stock may have given analysts what they wanted, it may not be enough for investors.

The company said that it had $0.23 in earnings per share (EPS) on $823 million in revenue. Thomson Reuters consensus estimates predicted that the quarter would have $0.21 in EPS on revenue of $820.18 million. In the same period of last year, the retailer posted EPS of $0.17 and $797.43 million in revenue.

Consolidated comparable sales increased 3%, following an 11% increase last year.

Looking ahead to the third quarter, the company expects EPS to be in the range of $0.40 to $0.41, excluding potential asset impairment and restructuring charges. The consensus estimates are $0.40 in EPS on $941.15 million in revenue for the third quarter.

In the latest quarter, the company opened five stores and closed seven. Internationally, the company opened 13 licensed stores.

On the books, American Eagle Outfitters cash and cash equivalents totaled $247.9 million at the end of the quarter, while in the same period from last year it had $327.3 million.

Jay Schottenstein, CEO of American Eagle, commented on earnings:

For the past few years, we have worked hard to lift our brands through merchandise leadership and innovation, strengthen our customer focus and invest in technology. Our efforts around these priorities are clearly paying off, as again evidenced by our strong earnings growth in the second quarter. As we enter the fall season, our execution, focus and market opportunities are greater than ever. In today’s evolving retail landscape, we are committed to offering the very best product and customer experience to position AEO’s brands as leaders in a new generation of successful retail brands.

Shares of American Eagle closed Tuesday at $18.96, with a consensus analyst price target of $19.00 and a 52-week trading range of $12.78 to $19.55. Following the release of the earnings report, the stock was down 5% at $18.00 in early trading indications Wednesday.

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