The firm also lowered its price target for the clothing retailer to $11 from $14.
American Eagle Outfitters was down 6.5% to $11.85 in trading on Monday.
"We are lowering our EPS estimates below consensus in conjunction with our Ahead of the Curve Report and focus group studies published today which highlight the consumer's shifting tastes for apparel, said Cowen analysts.
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TheStreet Ratings team rates AMERN EAGLE OUTFITTERS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERN EAGLE OUTFITTERS INC (AEO) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- AEO, with its decline in revenue, slightly underperformed the industry average of 6.6%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERN EAGLE OUTFITTERS INC reported lower earnings of $0.42 versus $1.31 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.42).
- The gross profit margin for AMERN EAGLE OUTFITTERS INC is currently lower than what is desirable, coming in at 29.38%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 1.00% trails that of the industry average.
- Net operating cash flow has decreased to $156.63 million or 44.98% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: AEO Ratings Report