Clothing and accessories retailer American Eagle Outfitters (NYSE: AEO) plunged in trading after the company’s holiday forecast disappointed investors. AEO has projected operating income in the range of $105 to $115 million for the holiday (fourth) quarter, below analysts’ expectations of $114 million. Nevertheless, the company expects revenues to grow in the high-single digits, while analysts were anticipating growth of 3.4%.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
The lower operating income projections can be attributed to higher sales, general, and administrative expenses. Indeed, they are expected to tick higher by around 20% in the fourth quarter, “including a 5-point impact from the 53rd week.”
For FY23, management has forecast revenues to be “up mid-single digits” year-over-year. At the same time, operating income is expected to be between $340 million and $350 million, at the high end of its prior guidance range of $325 to $350 million.
The company stated in its press release that this outlook “reflects strengthened demand and continued profit improvement. With better business trends driving higher incentives, SG&A is expected to be up in the low double digits for the year.”
AEO posted total revenues of $1.3 billion in the third quarter, up by 5% year-over-year and above analysts’ expectations of $1.28 billion. The company’s diluted earnings increased by 17% year-over-year to $0.49 per share, slightly above consensus estimates of $0.48 per share.
What is the Forecast for AEO Stock?
Analysts remain sidelined about AEO stock with a Hold consensus rating based on three Buys, four Holds, and one Sell. AEO stock has surged by more than 10% year-to-date, and the average AEO price target of $19.25 implies an upside potential of 18.5% at current levels.
