Is American Eagle Set For Higher Margins? 1 Analyst Explores

In a report published Tuesday, Stephens analyst Rick Patel maintained an Overweight rating on

, with the price target at $16. In the report, Stephens noted, "Eagle reports 4Q14 EPS on Wednesday, March 4. We are estimating EPS of $0.34, in line with the Street and at the high end of its guidance range. In early January, the company preannounced better-than-expected Holiday sales, including a positive comp in December. This is impressive given the tough and highly promotional retail environment." "We forecast 4Q comps of -2%, in line with the Nov/Dec Holiday results…Promotions at Eagle have been generally well controlled, especially compared to its peers…As such, AURs were up and margins should be higher for 4Q. We forecast GM of +375bp in 4Q and are optimistic of further improvement in 2015 driven by improved merchandise assortment, tight inventory control, lower cotton prices in 2H, and easy compares in 1H," Patel wrote. "Our channel checks have consistently placed Eagle as the winner among its peers, and we think this momentum will continue," the analyst added.