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American Eagle (AEO): Will it Disappoint in Q1 Earnings?

American Eagle Outfitters Inc. AEO is scheduled to report first-quarter fiscal 2016 results on May 18. Last quarter, this specialty retailer of casual apparel, accessories and footwear posted a positive earnings surprise of 2.4%.

Additionally, the company delivered an average positive earnings surprise of 15.8% in the trailing four quarters. Let's see how things are shaping up for this announcement.



Factors Influencing the Upcoming Results

American Eagle has been benefiting from its merchandise-related initiatives as well as actions taken to improve operational performance. Moreover, the company has been strengthening its global presence for some time now after witnessing strong profitability at its overseas licensed stores, with little capital requirements. While the company’s attempt to grow globally is likely to help it in augmenting business and meeting global demand, it also leads to adverse currency movements and other international risks, which remain concerns.

Additionally, high dependence on external suppliers and macroeconomic headwinds may dampen the upcoming results. Thus, we would prefer to wait and see what’s in store for American Eagle in the quarter to be reported.

Earnings Whispers

Our proven model does not conclusively project an earnings beat for American Eagle this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:

Zacks ESP: ESP for American Eagle is 0.00% since both the Most Accurate estimate and Zacks Consensus Estimate are poised at 18 cents per share.

Zacks Rank: American Eagle carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is undergoing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat:

Lowe's Companies Inc. LOW, scheduled to report earnings on May 18, has an Earnings ESP of +2.41% and a Zacks Rank #3 (Hold).

Best Buy Co. Inc. BBY, scheduled to report earnings on May 24, has an Earnings ESP of +2.94% and a Zacks Rank #2 (Buy).

DSW Inc. DSW, scheduled to report earnings on May 24, has an Earnings ESP of +2.17% and a Zacks Rank #3.

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