American Eagle Outfitters Q2 Results: What Are We Seeing?

American Eagle Outfitters (NYSE: AEO), which sells women’s and men’s apparel and accessories under the American Eagle, Tailgate, Todd Snyder and Aerie brands, is scheduled to report fiscal second-quarter earnings results on Thursday, Aug. 29. We expect the stock to report little to no change, with revenue and earnings in line with expectations in its upcoming second-quarter results. AEO shares are up 7% from about $21 to $23 since the beginning of the year, outperforming broader indexes, and the S&P is up 18% over the same period. In sharp contrast, AEO shares Abercrombie & Fitch shares (NYSE: ANF) saw its shares rise 92% during the same period.

AEO stock has shown a strong 25% rally from $20 in early January 2021 to around $23 today, compared to around 50% for the S&P 500 over that roughly 3-year period. However, AEO stock’s rally has been far from consistent. Stock returns were 26% in 2021, -45% in 2022 and 52% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022 and 24% in 2023 – suggesting that AEO underperformed S&P in 2021 and 2022.

In fact, consistently beating the S&P 500 – in good times and bad – has been tough for individual stocks in recent years; for heavyweights in the consumer discretionary sector including H, WMG and AMZN, and even megacap stars GOOG, TSLA and MSFT. In contrast, Trefis High Quality Portfolio, with its collection of 30 stocks, has outperformed the S&P 500 every year in the same period. Why? As a group, HQ Portfolio stocks have delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as seen in HQ Portfolio’s performance metrics. Given the current uncertain macro environment with elevated interest rates, could AEO face a similar situation as in 2021 and 2022? underperform the S&P in the next 12 months – or will there be a sharp increase?

Our forecast suggests that American Eagle Outfitters is valued at around $23 per share, which is in line with the current market price. Check out our interactive dashboard analysis American Eagle Outfitters Results Preview: What can we expect in the second quarter? For more details.

(1) Revenues expected to be in line with consensus estimates

Trefis estimates AEO revenue in the second quarter of 2024 at $1.3 billion, slightly below consensus. The apparel retailer’s revenue rose 6% year-over-year to $1.1 billion in the first quarter. The Aerie brand grew 4% year-over-year (with same-store sales up 6%) to $373 million, and its core American Eagle brand grew 8% year-over-year (7% comparable-store sales) to $724 million in the first quarter. Additionally, AEO store revenue increased 4% and digital revenue increased 12%. The retailer’s gross margin increased to 40.6% in the first quarter of 2024, up 240 basis points year-over-year. The margin expansion was driven by strong demand, lower product and freight costs, and continued benefits from lower markdowns and leverage across distribution, rent, and delivery. Looking ahead, American Eagle expects fiscal 2024 revenue growth of 2% to 4% and second-quarter revenue growth in the high single digits.

AEO also recently unveiled its new Powering Profitable Growth plan, which aims to achieve mid-to-high annual operating income expansion on 3% to 5% annual revenue growth over the next three years and approximately 10% operating margin. A few of the strategies mentioned include growing American Eagle and strengthening its denim leadership position. AEO will also look to drive Aerie’s expansion and accelerate its sportswear opportunities.

(2) Earnings per share will likely be in line with consensus estimates

AEO’s second-quarter 2024 earnings per share are expected to be 38 cents, according to Trefis analysis, beating consensus estimates. In the first quarter, AEO’s earnings were $0.34 per share, up from $0.09 in the same quarter a year ago,

(3) The estimated share price is in line with the current market price

Following our American Eagle Outfitters valuationWith estimated earnings per share of around $1.78 and a P/E multiple of 12.9x in fiscal 2024, this translates to a price of around $23, which is in line with the current market price.

It’s useful to see how your competitors stack up. AEO Peers shows you how American Eagle Outfitters stock stacks up against its competitors on important metrics. You can find other useful comparisons for companies across industries at Peer Comparisons.

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