AEO Earnings: American Eagle Stock Down on Mixed Q1 Results

Clothing and accessories retailer American Eagle Outfitters (NYSE:AEO) stock declined 9.4% in yesterday’s extended trading session following the release of mixed Q1 results. The earnings of $0.34 per share surpassed estimates, while revenues fell short of expectations.

According to the TipRanks Stock Analysis tool, “Bulls Say, Bears Say,” analysts bullish on AEO had anticipated a Q1 earnings beat due to the company’s strong comparable sales and gross margins.

AEO: Q1 Snapshot

The company’s earnings rose by 277% year-over-year and surpassed consensus estimates of $0.28 per share. Meanwhile, AEO generated Q1 revenues of $1.14 billion, an increase of 6% from the same quarter last year. However, it missed Street estimates of $1.15 billion.

Comparable sales for the company’s Aerie and American Eagle segments increased by 6% and 7%, respectively, on a year-over-year basis. Furthermore, AEO’s total inventory climbed 9% to $681 million, with units up 10%.

Furthermore, American Eagle’s gross margin expanded by 240 basis points to reach 40.6%. This improvement was driven by effective inventory management, a more profitable clearance strategy, and reduced transportation costs.

Q2 and Fiscal 2024 Outlook

For FY24, AEO expects revenue to come between $5.44 billion and $5.54 billion, up 2% to 4% year-over-year. The expected range remains above the consensus estimate of $5.43 billion. Also, the company forecasts that operating income will be in the range of $445 to $465 million.

For the upcoming second quarter, AEO expects operating income to come in between $95 million and $100 million, with revenue likely to grow by high-single digits.

What Is the Stock Price Forecast for AEO?

Overall, American Eagle has a Hold consensus rating based on three Buy, five Hold, and two Sell recommendations. The analysts’ average price target on AEO stock of $26.20 implies an upside potential of 8.9% from current levels. Shares of the company have gained 27.9% in the past six months.

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