TD Cowen has adjusted its outlook on American Eagle Outfitters (NYSE: NYSE:AEO), reducing the stock's price target to $23.00 from the previous $25.00 while maintaining a Hold rating.
The revision follows the company's second-quarter earnings per share (EPS), which aligned with the general market expectations. However, certain segments within the retailer's portfolio showed weaker-than-anticipated results.
The report highlighted that sales from the swimwear and intimates lines at Aerie, American Eagle's lingerie and lifestyle retailer, did not meet expectations. Additionally, it was noted that the Men's category at American Eagle underperformed relative to the Women's segment, capping the potential for a more robust financial quarter.
Despite these challenges, the firm observed positive back-to-school (BTS) trends, which could signal a more favorable outlook for the brand. The guidance for the third quarter suggests a moderation in sales for September and October compared to August's performance.
In other recent news, American Eagle Outfitters reported a record revenue of $1.3 billion in the second quarter of 2024, a 4% increase in comparable sales. This was accompanied by a 55% rise in operating income and a 56% surge in earnings per share to $0.39. Both the American Eagle and Aerie brands contributed to this growth, with respective increases of 5% and 4%.
Telsey Advisory Group revised its price target for American Eagle to $23, while maintaining a Market Perform rating. Citi also maintained a neutral outlook on the company, setting a price target of $22.00.
In terms of recent developments, American Eagle ended the quarter with $192 million in cash and no debt, returning $120 million to its shareholders. The company revised its full-year operating income outlook to range between $455 million and $465 million. The firm's gross margin rose by 10%, indicating a positive performance across both physical stores and digital channels.
InvestingPro Insights
As American Eagle Outfitters (NYSE:AEO) navigates through its recent earnings report and market expectations, insights from InvestingPro provide a deeper look into the company's financial health and future prospects. Notably, American Eagle is trading at a low P/E ratio relative to near-term earnings growth, with an adjusted P/E ratio of 11.78 over the last twelve months as of Q2 2025. This suggests that the stock may be undervalued given its earnings potential.
The resilience of American Eagle's business model is underscored by its ability to maintain dividend payments for 21 consecutive years, with a dividend yield of 2.41% as of 2024. Additionally, the company's liquid assets surpass short-term obligations, indicating a strong liquidity position that could support ongoing operations and strategic initiatives. With analysts predicting profitability for this year and a positive revenue growth of 7.9% over the last twelve months as of Q2 2025, American Eagle seems poised to leverage its financial stability in the face of market challenges.
For investors seeking a comprehensive analysis, there are over 5 additional InvestingPro Tips available, which can be accessed through the dedicated InvestingPro platform for American Eagle Outfitters. These tips provide valuable insights that could guide investment decisions and enhance understanding of the company's performance and potential.
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