UPDATE: Nomura Initiates Coverage on American Eagle Outfitters with Neutral Rating, $15 PT Following Negative HSD 2Q Comps

In a report published Monday, Nomura analyst Simeon Siegel initiated coverage on American Eagle Outfitters AEO with a Neutral rating and $15.00 price target. In the report, Nomura noted, “Following six quarters of remarkable comps, the promotional environment caught up with American Eagle Outfitters, Inc. (AEO), driving negative HSD 2Q comps. With very difficult 2H13 2-year comp compares ahead, we believe AEO's comps will remain in negative MSD-to-HSD territory for the next several quarters. If AEO can right its ship and push margins toward its 14-16% EBIT margin goal, we believe it could drive ~$1.58 in FY15 EPS power, based on $3.65bn in sales and 13% EBIT margins. We project FY13/FY14 EPS estimates of $0.87/$1.09 versus the Street at $0.89/$1.13. Our price target of $15 is based on 14x our FY14 estimate, in line with the softlines coverage universe average 14x multiple and AEO's historical average of 14x.” American Eagle Outfitters closed on Friday at $14.77.