Yesterday, S&P Cut American Eagle Outfitters (AEO) to Strong Sell From Hold

Why would S&P lower their ratings on American Eagle Outfitters AEO to Strong Sell from Hold yesterday afternoon, hours before this morning’s earnings release? After all, S&P had the previous 3 months to analyze American Eagle’s quarter. The move smacks of the desperation that earnings and expectations would come in embarrassingly lower than analyst Driscoll anticipated. It’s also possible that the poor macro economic retail outlook pressured S&P to cut their ratings on everything. Still this last minute maneuvering contributes to the extremely short term thinking that is poisoning Wall St. Hey, Driscoll & S&P, next time give it at least a week. Today American Eagle reported in line earnings but missed revenue projections. AEO is trading up 6% for the day. Here’s the report: “S&P Lowers Recommendation On American Eagle (AEO 12) To Strong Sell From Hold: We think the outlook for teen spending has weakened for the next 12 months. S&P economists recently lowered their growth projection for 2010 personal consumption expenditures to 1.6% from 2.4%. With unemployment expected to remain above 9% through 2011 and teen unemployment stubbornly at 25%, we view AEO as vulnerable as we see teens opting for connectivity over apparel in the discretionary choices. Applying a narrower risk premium and a lower forward P/E of 8.8X, about a 10% discount to peers, we lower our target price to $10 from $16. /M. Driscoll-CFA”