Janney Upgrades American Eagle Prior to Earnings

On Monday, Janney Capital Markets analyst Adrienne Tennant upgraded shares of

from Neutral to Buy and raised the price target from $17 to $20 due to plausible 2014 recovery. Tennant noted American Eagle's strong brand equity and limited downside from valuation support. The analyst commented on the company's "1) potential for positive inventory and Gross Margin Return on Inventory Investment (“GMROI”) inflections in early 2014, 2) stabilizing promotional environment as the sector gets inventory under control for 2H14, and 3) our belief they are best-positioned in fashion and value among the “three As.”" Janney Capital added that 4Q13 consensus estimates already reflect gross margin pressure. The analyst looks for improvement in comp and margin pressure performance. Tennant maintained EPS estimates and remain conservative on the environment. FY13 EPS estimate was reported at $0.86 versus consensus of $0.85 and FY14 estimates of $1.01 versus consensus of $1.09. American Eagle will report earnings before the market opens on Friday, December 6, 2013. The company will hold a conference call for investors and the general public at 9:00 am ET on Friday. American Eagle Outfitters closed at $16.27 on Wednesday.