NEW YORK (TheStreet) -- Stifel has downgraded American Eagle (AEO) to "hold" from "buy" after noting the visibility of a turnaround is decreasing. In pre-market trading, shares have taken off 4.3% to $13.70.
Earlier in the month, the retailer said sales for the January-ending quarter had so far fallen 2% to $882 million. Sales comps plummeted 7% over the nine weeks to Jan. 4.
"Following a solid Thanksgiving weekend, traffic and sales through Christmas week were on the low end of our expectations and the retail environment was highly promotional, pressuring margins and EPS," CEO Richard Hanson said in a statement.
TheStreet Ratings team rates AMERN EAGLE OUTFITTERS INC as a Buy with a ratings score of B-. The team has this to say about their recommendation:
"We rate AMERN EAGLE OUTFITTERS INC (AEO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AEO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
- AEO, with its decline in revenue, underperformed when compared the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 5.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- AMERN EAGLE OUTFITTERS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERN EAGLE OUTFITTERS INC increased its bottom line by earning $1.31 versus $0.90 in the prior year. For the next year, the market is expecting a contraction of 44.3% in earnings ($0.73 versus $1.31).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.63%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 68.29% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full analysis from the report here: AEO Ratings Report