Aeropostale (ARO) Stock Soaring Today Following Upbeat Revised Guidance

Aeropostale (ARO) stock is up after the company released its preliminary fourth-quarter results for fiscal year 2014 yesterday.

Author:: Kurumi Fukushima
Publish date:: Feb 11, 2015 11:22 AM EST

NEW YORK (TheStreet) -- Shares of Aeropostale (ARO) are soaring 10.55% to $3.40 in late morning trading Wednesday, adding to its gains from yesterday after the teen apparel retailer raised its fiscal fourth quarter earnings and revenue guidance.

Aeropostale now expects a loss of 1 cent to 6 cents per share for the quarter, better than its previous guidance of a loss of between 25 cents to 31 cents per share. Analysts are expecting a loss of 7 cents a share for the quarter.

For the fiscal fourth quarter, the company forecasts revenue of $594.5 million, higher compared to analysts' estimates of $578.78 million for the quarter.

Exclusive Report:Jim Cramer's Best Stocks for 2015

The company also announced that it has hired Marc Miller as new COO of the company, and David Dick as the CFO.

Separately, TheStreet Ratings team rates AEROPOSTALE INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AEROPOSTALE INC (ARO) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 104.2% when compared to the same quarter one year ago, falling from -$25.62 million to -$52.32 million.
The debt-to-equity ratio of 1.31 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.49, which clearly demonstrates the inability to cover short-term cash needs.
Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, AEROPOSTALE INC's return on equity significantly trails that of both the industry average and the S&P 500.
The gross profit margin for AEROPOSTALE INC is rather low; currently it is at 17.78%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -11.55% is significantly below that of the industry average.
Net operating cash flow has significantly decreased to -$36.03 million or 321.94% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
You can view the full analysis from the report here: ARO Ratings Report