American Eagle Outfitters Inc. (AEO) delivered the kind of earnings report that makes analysts scramble to update their spreadsheets. The apparel retailer posted third-quarter results on Tuesday that sailed past Wall Street's expectations, proving that sometimes the mall actually works.
The numbers tell a pretty straightforward story. American Eagle brought in $1.36 billion in revenue for the quarter, comfortably ahead of the $1.32 billion analysts were expecting. More impressive was the bottom line: adjusted earnings hit 53 cents per share, crushing the consensus estimate of 44 cents.
CEO Jay Schottenstein sounded like someone who's having a very good holiday season. "Strong momentum has continued into the fourth quarter, including an excellent start to the holiday season. We delivered a record-breaking Thanksgiving weekend, led by an acceleration in demand across brands and channels and underscored by outstanding growth at Aerie and Offline," he said.
That momentum translated into updated guidance that should keep investors happy. The company now expects fourth-quarter operating income between $155 million and $160 million, citing strong sales trends. They're also projecting comparable sales to climb 8% to 9% year-over-year in the current quarter, which is the kind of growth that gets attention in retail.
The market certainly noticed. American Eagle shares jumped 16.7% to trade at $24.32 on Wednesday, a meaningful move that reflects renewed confidence in the retailer's trajectory.
Wall Street's analyst community responded with a flurry of price target adjustments. Here's who made moves:
- Barclays analyst Adrienne Yih kept an Underweight rating but raised the price target from $14 to $20
- JP Morgan analyst Matthew Boss upgraded the stock from Underweight to Neutral and bumped the price target from $14 to $20
- Telsey Advisory Group analyst Dana Telsey maintained a Market Perform rating while lifting the target from $18 to $25
- B of A Securities analyst Christopher Nardone stuck with an Underperform rating but raised the price target from $11 to $18
- UBS analyst Jay Sole maintained a Buy rating and pushed the price target from $22 to $31
What's interesting here is that even the skeptics are raising their targets. When analysts with Underweight and Underperform ratings are moving their numbers up by 40% to 60%, that tells you the results were hard to ignore.
