Bear of the Day: American Eagle Outfitters (AEO)

I am not going to sit up here and preach Armageddon like the talking heads did all weekend. The US economy is still rocking and rolling, the trade war with China is easing, and we’ve got a big round of earnings ahead of us. In short, there are plenty of reasons to be bullish. Like most news events nowadays, this US-Iran story is getting blown way out of proportion. The 24-hour news cycle would have it no other way. To kickoff the week, investors should be out there looking for bargains. That doesn’t mean we should fall into value traps. In fact, I have a name to be careful of heading into.

That name is today’s Bear of the Day, American Eagle Outfitters (AEO). American Eagle Outfitters, Inc. operates as a specialty retailer that provides clothing, accessories, and personal care products under the American Eagle and Aerie brands. The company also provides jeans, and other apparel and accessories for men and women; and intimates, activewear, and swim collections, as well as personal care products for women. In addition, it offers sports apparel under the Tailgate brand; and menswear products under the Todd Snyder New York brand name. As of March 6, 2019, it operated approximately 934 American Eagle stores, 262 Aerie stores, 5 Tailgate stand-alone stores, and 1 Todd Snyder stand-alone store in the United States, Canada, Mexico, China, and Hong Kong

Currently, American Eagle Outfitters is a Zacks Rank #4 (Sell). The reason for the negative Zacks Rank lies in the estimate revisions coming from analysts all over Wall Street. Despite the Retail Industry being in the Top 22% of our Zacks Industry Rank, American Eagle Outfitters has seen nine analysts drop their estimates for the current year, while eight have done so for next year. The move has dropped our current year Zacks Consensus Estimate from $1.59 to $1.47 while next year’s number has come down from $1.65 to $1.48. That sort of contraction means there’s only a very small margin of growth from this year to next year.

Investors interested in other retail stocks have plenty to choose from. Among the list of stocks to investigate further are Zacks Rank #1 (Strong Buy) stocks Buckle (BKE) and Express (EXPR).

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