American Eagle Outfitters Expects Earnings Decline; Shares Drop 5.3%

Shares of American Eagle Outfitters, Inc. (NYSE: AEO) dropped 5.3% on March 2 to close at $21.33, after the company delivered in-line fourth-quarter results and issued a cautious outlook for the upcoming year.

American Eagle Outfitters is a leading global lifestyle, clothing, and accessories retailer. It sells high-quality, on-trend clothing, accessories, and personal care products at affordable prices. The company is more than 40 years old and operates under its American Eagle and Aerie brands.

Q4 Numbers

Q4 adjusted earnings of $0.35 per share were in-line with the consensus estimate. The company reported earnings of $0.39 per share for the prior-year period.

Meanwhile, revenues jumped 17% year-over-year to $1.51 billion, but were modestly short of consensus estimates of $1.52 billion.

The increase in revenues reflects a surge in Aerie revenue and American Eagle revenue, growing 27% to $428 million and 11% to $1.04 billion, respectively.

For the full year 2021, AEO crossed the milestone $5 billion mark in total revenues for the first time ever.

Cautious FY2022 Outlook

Given various macro uncertainties and structural improvements to the business, the company provided a cautious outlook for FY2022.

The company anticipates an earnings decline in the first half of the year followed by an expected recovery in the second half, mainly due to continued freight pressures and the fade out of federal stimulus.

For the full year, the company forecast operating profit to be in the range of $550 to $600 million.

CEO Comments

AEO’s CEO, Jay Schottenstein, commented, “We entered 2022 a stronger company, supported by our powerful brands, a proven strategy, improved discipline and strategically advantaged operations.”

Further cautioning, he added, “While the macro environment remains challenging and we are taking this into account in our plans for the year, we expect our results to still reflect meaningful progress versus prior years, setting a new base-line for profitability.”

Analysts Recommendation

Consensus among analysts is a Strong Buy based on 6 Buys and 2 Holds. At the time of writing, the average American Eagle price target of $32.13 implies 50.63% upside potential to current levels.

TipRanks’ Smart Score

AEO scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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