American Eagle Outfitters Turns Bullish After Meeting With Management

American Eagle Outfitters Inc (NYSE: AEO) reported upbeat fourth-quarter earnings in March.

The company is poised to generate revenue growth across its brand portfolio, with 3% to 5% consolidated revenue growth in its flagship brand and Aerie, according to JPMorgan.

The American Eagle Outfitters Analyst: Matthew Boss upgraded the rating from Neutral to Overweight, while raising the price target from $26 to $31.

The American Eagle Outfitters Thesis: A profitability inflection could translate to operating income growth of mid-to-high teens, Boss said in the upgrade note.

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After meeting the management team at American Eagle Outfitters, the analyst stated the company had “multi-year conservatism embedded in the 3-year financial plan.”

“Specifically, Aerie revenue growth is embedded +MSD-HSD% and Product Margins is assumed Flat (despite visibility to product cost favorability through Holiday ’24 & ongoing AUR/brand mix benefits), with every incremental point of revenue growth above plan flowing through to EBIT at a 40-50% rate (vs. ~20% historically),” he added.

“Put together, the Powering Profitable Growth Plan will drive consistent total shareholder returns of 15-20%, driven by +mid-to-high-teens EBIT growth, 2.0% dividend yield, and opportunistic share repurchases above the level required to offset dilution from stock-based compensation w/ AEO’s Board recently increasing the share repurchase authorization to 30M shares,” Boss further wrote.

AEO Price Action: Shares of American Eagle Outfitters were up 0.24% to $23.44 at the time of publication on Thursday.

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