Wells Fargo Raises Valuation Range on American Eagle (AEO) Following Earnings and Guidance
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Price: $16.17 -0.8%
Rating Summary:
12 Buy, 24 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
12 Buy, 24 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Wells Fargo is maintaining its Market Perform rating on shares of American Eagle Outfitters (NYSE: AEO) following the release of its Q3 results and is raising its price valuation range from $13-$14 to $14-$15.
The company reported Q3 earnings inline with the consensus, $0.27, and offered Q4 guidance of $0.40-$0.44, which was ahead of the consensus of $0.39. The firm notes the strong guidance follows solid Black Friday sales; and although some sales may have been pulled from December to November, Wells Fargo still believes comps will be up in the high single digit area for Q4.
Wells Fargo highlights the 5 percent comp increase for Q3 was largely driven by the 9 percent increase in transactions. Inventories rose 40 percent over the quarter as units increased 20 percent.
To go inline with recent market trends and the company's Q3 results, the firm is raising its FY11 and FY12 EPS estimates from $0.91 and $1.06 to $0.95 and $1.15.
An analyst at Wells Fargo comments, "While AEO has margin recovery opportunity due to merchandise margin losses over the past few years, comps remain inconsistent given an increasingly competitive environment and some fashion issues. AEO is changing its lean inventory strategy which is increasing markdown risks, however, SG&A initiatives could offset some of the gross margin pressure. We believe AEO's opportunities are fairly reflected at current levels."
For an analyst ratings summary and ratings history on American Eagle Outfitters click here. For more ratings news on American Eagle Outfitters click here.
Shares of American Eagle Outfitters closed at $13.43 yesterday.
The company reported Q3 earnings inline with the consensus, $0.27, and offered Q4 guidance of $0.40-$0.44, which was ahead of the consensus of $0.39. The firm notes the strong guidance follows solid Black Friday sales; and although some sales may have been pulled from December to November, Wells Fargo still believes comps will be up in the high single digit area for Q4.
Wells Fargo highlights the 5 percent comp increase for Q3 was largely driven by the 9 percent increase in transactions. Inventories rose 40 percent over the quarter as units increased 20 percent.
To go inline with recent market trends and the company's Q3 results, the firm is raising its FY11 and FY12 EPS estimates from $0.91 and $1.06 to $0.95 and $1.15.
An analyst at Wells Fargo comments, "While AEO has margin recovery opportunity due to merchandise margin losses over the past few years, comps remain inconsistent given an increasingly competitive environment and some fashion issues. AEO is changing its lean inventory strategy which is increasing markdown risks, however, SG&A initiatives could offset some of the gross margin pressure. We believe AEO's opportunities are fairly reflected at current levels."
For an analyst ratings summary and ratings history on American Eagle Outfitters click here. For more ratings news on American Eagle Outfitters click here.
Shares of American Eagle Outfitters closed at $13.43 yesterday.
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