'The Teen Retailer To Own': Wunderlich On American Eagle

Wunderlich reiterated its slightly-above-consensus top- and bottom-line projections for American Eagle Outfitters AEO, which is reporting its third-quarter financial results on Wednesday.

The brokerage, which maintains its Buy rating and $22 price target, believes there is upside to third-quarter Street consensus of EPS of $0.41, comps of +2.8 percent and revenue of $940 million. Wunderlich projects earnings of $0.42 a share for the third quarter.

Rating Justification

“We believe, after disappointing results from a number of key teen players, that American Eagle remains the teen player to own, with a focus on denim and men's which we believe positions the company for continued market share gains and further upside,” analyst Eric Beder wrote in a note.

The analyst pointed out that the midpoint of his third-quarter revenue projection via Google Trends for American Eagle is $980 million — a full $40 million above consensus, driven by a 2 percent rise in search term popularity — the fifth consecutive quarter of year-over-year growth.

Beder said the company’s top line and margins should receive further boost from the bralette business at Aerie and international markets.

Beder also expects a solid fourth quarter outlook from the retailer as it is expected to continue to take share from rivals due to its focus on wear-now items and denim.

Shares of American Eagle closed Friday’s session at $18.34.