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Category: Stock Market and American Eagle (AEO)
Date: 25 November 2020 Stock Price: of AEO $17.79 We take a look at the 3rd quarter 2020 earnings report of American Eagle Outfitters, an on-trend clothing, accessories and personal care products company. The group reported revenues of $1.031 billion and net income of $58.1 million for the 3rd quarter of their 2020 fiscal year.
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- Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer commented - The third quarter exceeded our expectations thanks to the exceptional execution, numerous accomplishments and dedication of our teams and the support of our global partners. Once again, Aerie delivered outstanding results, demonstrating the power of this incredible brand and the massive opportunity ahead"
About American Eagle Outfitters
American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle Outfitters® and Aerie® brands. The company operates more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at more than 200 international locations operated by licensees in 25 countries
Overview of American Eagle Outfitters Q3 2020 earnings report
Data below refers to the latest quarter's data unless specified otherwise:
- Net sales: $1.031 billion (down from $1.066 billion for the same quarter of the prior year)
- Net sales decreased by -3.3% over the last 12 months
- Cost of sales : $616.840 million (down from $659.350 million for the same quarter of the prior year)
- Cost of sales expenses increased by -6.4% over the last 12 months
- Some margin gain for American Eagle Outfitters as their net sales decreased at a slower rate than their cost of sales
- Net income: $58.1 million (down from $80.7million for the same quarter of the prior year)
- Diluted earnings per share: $0.32 (down from $0.48 for the same quarter of the prior year)
- Shares outstanding : 184.397 million (up from 168.693 million for the same quarter of the prior year)
- Cash and cash equivalents: $692.4 million
- Cash and cash equivalents per share: $3.75
- Cash and cash equivalents makes up 21.1% of American Eagle Outfitters market capital
- Cash and cash equivalents makes up 36.9% of American Eagle Outfitters total assets
- Merchandise inventories: $559.9 million
- Merchandise inventories makes up 16% of American Eagle Outfitters total assets
- Stockholders equity in American Eagle Outfitters: $1.068 billion
- Stockholders equity per American Eagle Outfitters stock: $5.79
- American Eagle Outfitters is trading at 3.07 times its stockholders equity per share which is just within the expected range of between 2 and 4 times that most firms tend to trade at
- Firms in the S&P 500 trades at an average price to book value of 3.9.
American Eagle Outfitters management commentary on their Q3 2020 earnings report
PITTSBURGH--(BUSINESS WIRE)-- American Eagle Outfitters, Inc. (NYSE: AEO) today reported operating income of $96 million for the 13 weeks ended October 31, 2020, compared to $103 million for the 13 weeks ended November 2, 2019. Adjusted operating income of $103 million this year excluded $7 million of expenses primarily related to COVID-19 protocols.
Reported EPS of $0.32 compared to $0.48 last year. Adjusted EPS of $0.35 this year excluded $0.02 of expenses primarily related to COVID-19 protocols and $0.01 of non-cash interest expense on the company’s convertible notes. The adjusted EPS decline to last year reflected a higher tax rate and the impact from higher interest expense and diluted shares outstanding related to convertible debt.
Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer commented, “The third quarter exceeded our expectations thanks to the exceptional execution, numerous accomplishments and dedication of our teams and the support of our global partners. Once again, Aerie delivered outstanding results, demonstrating the power of this incredible brand and the massive opportunity ahead. Across AE and Aerie, higher full-price selling led to strong margins, reflecting merchandise quality, inventory optimization and our enduring brands.”
Reported EPS of $0.32 compared to $0.48 last year. Adjusted EPS of $0.35 this year excluded $0.02 of expenses primarily related to COVID-19 protocols and $0.01 of non-cash interest expense on the company’s convertible notes. The adjusted EPS decline to last year reflected a higher tax rate and the impact from higher interest expense and diluted shares outstanding related to convertible debt.
Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer commented, “The third quarter exceeded our expectations thanks to the exceptional execution, numerous accomplishments and dedication of our teams and the support of our global partners. Once again, Aerie delivered outstanding results, demonstrating the power of this incredible brand and the massive opportunity ahead. Across AE and Aerie, higher full-price selling led to strong margins, reflecting merchandise quality, inventory optimization and our enduring brands.”
“We are very pleased with early holiday trends in November and the strong response to our assortments. We have significant business ahead of us and are well-positioned and ready to serve our customers. I’m also very encouraged by our overall performance this year, especially in the midst of an unprecedented crisis. Our teams really stepped up to accelerate initiatives that will enable us to emerge from 2020 as a stronger organization with momentum and tremendous growth potential.”
COVID-19 Expenses and Restructuring Charges
In the third quarter of 2020, the company incurred incremental expenses primarily related to COVID-19 protocols of approximately $7 million pre-tax, or $0.02 per share after-tax.
Inventory
Total ending inventory at cost decreased $87 million or 13% to $560 million. The decline reflected AE’s inventory optimization initiatives aimed at streamlining assortments and better aligning to sales plans, partly offset by higher inventory at Aerie to support strong demand.
Capital Expenditures
In the third quarter of 2020, capital expenditures totaled $31 million. On a year-to-date basis, capital expenditures were $93 million. For fiscal 2020, the company continues to expect capital expenditures to be in the range of $100 to $125 million, prioritizing strategic customer-facing and supply chain investments. This compares to $210 million for the full-year fiscal 2019.
Cash Flow and Balance Sheet
The company generated positive operating cash flow during the third quarter and ended the period with total cash and short-term investments of $692 million, an increase from $265 million last year. The quarter-end cash balance included $406 million in proceeds from the April 2020 convertible notes offering. During the third quarter, the company repaid the remaining $200 million balance on its revolving credit facility.
Shareholder Returns
As previously announced, the company suspended its dividend in June 2020 and at this point does not anticipate declaring a dividend for the rest of this year. The company’s first quarter cash dividend was deferred until 2021 and will be payable on April 23, 2021, to stockholders of record at the close of business on April 9, 2021.
COVID-19 Expenses and Restructuring Charges
In the third quarter of 2020, the company incurred incremental expenses primarily related to COVID-19 protocols of approximately $7 million pre-tax, or $0.02 per share after-tax.
Inventory
Total ending inventory at cost decreased $87 million or 13% to $560 million. The decline reflected AE’s inventory optimization initiatives aimed at streamlining assortments and better aligning to sales plans, partly offset by higher inventory at Aerie to support strong demand.
Capital Expenditures
In the third quarter of 2020, capital expenditures totaled $31 million. On a year-to-date basis, capital expenditures were $93 million. For fiscal 2020, the company continues to expect capital expenditures to be in the range of $100 to $125 million, prioritizing strategic customer-facing and supply chain investments. This compares to $210 million for the full-year fiscal 2019.
Cash Flow and Balance Sheet
The company generated positive operating cash flow during the third quarter and ended the period with total cash and short-term investments of $692 million, an increase from $265 million last year. The quarter-end cash balance included $406 million in proceeds from the April 2020 convertible notes offering. During the third quarter, the company repaid the remaining $200 million balance on its revolving credit facility.
Shareholder Returns
As previously announced, the company suspended its dividend in June 2020 and at this point does not anticipate declaring a dividend for the rest of this year. The company’s first quarter cash dividend was deferred until 2021 and will be payable on April 23, 2021, to stockholders of record at the close of business on April 9, 2021.
American Eagle Outfitters (AEO) stock price history over the last 5 years
The image below, obtained from Google shows the stock price history of American Eagle Outfitters for the last 5 years. And the stock hasn't done much in terms of returns offers to investors over the last 5 years. 5 years ago the stock of American Eagle Outfitters was trading around $16.40 and its currently trading at $17.79. That's a slightly gain of 8.5% provided to American Eagle Outfitters over the last 5 years.
The stock of American Eagle Outfitters (AEO) is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term momentum and sentiment of American Eagle Outfitters stock is positive at this point in time.
The stock of American Eagle Outfitters (AEO) is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term momentum and sentiment of American Eagle Outfitters stock is positive at this point in time.
American Eagle Outfitters (AEO) stock vs Buckle (BKE) stock over the last 5 years
The image below shows the stock price performance of American Eagle Outfitters (AEO) and Buckle (BKE) over the last 5 years. The trends of the two clothing firms are very similar, however the total stock price returns of these two firms are very different. The summary below shows the stock price returns of these firms over the last 5 years.
The stock of Buckle (BKE) has easily outperformed that of American Eagle Outfitters over the last 5 years.
- Buckle (BKE): 24.47%
- American Eagle Outfitters (AEO): 0.91%
The stock of Buckle (BKE) has easily outperformed that of American Eagle Outfitters over the last 5 years.
Recent coverage of American Eagle Outfitters
The extract below covers the latest regarding American Eagle Outfitters as obtained from Pulse2.com
Shares of American Eagle Outfitters Inc (NYSE: AEO) have received a price target increase from $21 to $22 by JPMorgan. JPMorgan analyst Matthew Boss is also maintaining an “Overweight” rating on the company’s shares.
American Eagle recently announced its Q3 2020 results. For the quarter, the company reported a 34% increase in revenue and profits. And the company had ended the quarter with $692 million in cash.
The operating income for the quarter was $96 million for the 13 weeks ended October 31, 2020, compared to $103 million for the 13 weeks ended November 2, 2019. And adjusted operating income of $103 million this year excluded $7 million of expenses primarily due to COVID-19 protocols.
The reported EPS was $0.32 compared to $0.48 last year. And the adjusted EPS of $0.35 this year excluded $0.02 of expenses primarily related to COVID-19 protocols and $0.01 of non-cash interest expense on the company’s convertible notes. The adjusted EPS decline to last year reflected a higher tax rate and the impact from higher interest expense and diluted shares outstanding related to convertible debt.
“The third quarter exceeded our expectations thanks to the exceptional execution, numerous accomplishments, and dedication of our teams and the support of our global partners. Once again, Aerie delivered outstanding results, demonstrating the power of this incredible brand and the massive opportunity ahead. Across AE and Aerie, higher full-price selling led to strong margins, reflecting merchandise quality, inventory optimization and our enduring brands,” said AEO’s Executive Chairman of the Board and CEO Jay Schottenstein.
Read the full article here
Shares of American Eagle Outfitters Inc (NYSE: AEO) have received a price target increase from $21 to $22 by JPMorgan. JPMorgan analyst Matthew Boss is also maintaining an “Overweight” rating on the company’s shares.
American Eagle recently announced its Q3 2020 results. For the quarter, the company reported a 34% increase in revenue and profits. And the company had ended the quarter with $692 million in cash.
The operating income for the quarter was $96 million for the 13 weeks ended October 31, 2020, compared to $103 million for the 13 weeks ended November 2, 2019. And adjusted operating income of $103 million this year excluded $7 million of expenses primarily due to COVID-19 protocols.
The reported EPS was $0.32 compared to $0.48 last year. And the adjusted EPS of $0.35 this year excluded $0.02 of expenses primarily related to COVID-19 protocols and $0.01 of non-cash interest expense on the company’s convertible notes. The adjusted EPS decline to last year reflected a higher tax rate and the impact from higher interest expense and diluted shares outstanding related to convertible debt.
“The third quarter exceeded our expectations thanks to the exceptional execution, numerous accomplishments, and dedication of our teams and the support of our global partners. Once again, Aerie delivered outstanding results, demonstrating the power of this incredible brand and the massive opportunity ahead. Across AE and Aerie, higher full-price selling led to strong margins, reflecting merchandise quality, inventory optimization and our enduring brands,” said AEO’s Executive Chairman of the Board and CEO Jay Schottenstein.
Read the full article here
American Eagle Outfitters (AEO) latest stock valuation
So based on American Eagle Outfitters 3rd quarter 2020 earnings report what do we value the stock price at? Based on the group's latest earnings report our valuation model provides a target price (full value price) for American Eagle Outfitters at $20.10 a stock. We therefore believe American Eagle Outfitters stock is undervalued at its current price of $17.79
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $20.10 A good entry point into the stock of American Eagle Outfitters would therefore be at $18.10 or below.
Since the stock of American Eagle Outfitters is trading at well below our suggested entry point into the stock we rate the stock of American Eagle Outfitters as a buy.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $20.10 A good entry point into the stock of American Eagle Outfitters would therefore be at $18.10 or below.
Since the stock of American Eagle Outfitters is trading at well below our suggested entry point into the stock we rate the stock of American Eagle Outfitters as a buy.
Next earnings release of American Eagle Outfitters
It is expected that American Eagle Outfitters (AEO) will release their 4th quarter 2020 earnings report in late February 2021