Why Is American Eagle Outfitters (AEO) Trading Lower on Thursday?

In Thursday intraday trading, American Eagle Outfitters (NYSE:AEO)’s stock has declined by nearly 4% on the back of the company reporting its financial results for the third quarter of fiscal 2015, ended October 31. The company posted an adjusted EPS from continuing operations of $0.35, which represents an increase of 59% on the year. The company’s revenue of $919 million was also higher than the $854 million figure reported a year earlier. Moreover, American Eagle Outfitters managed to beat the EPS expectations by $0.01, but the revenue came short of the consensus estimate of $924.4 million.

American Eagle Outfitters (NYSE:AEO) also managed to deliver a 9% comparable store sales growth, versus a 5% decline reported for the third quarter of last year. For the current quarter, the company expects to report EPS between $0.40 and $0.42, compared to a consensus estimate of $0.41, while comparable store sales are expected to grow by mid-single digits.

The stock opened around 2.5% higher on Thursday, but has lost ground in the following hours. However, several analysts have reiterated bullish ratings on American Eagle Outfitters (NYSE:AEO), including Cowen and Company and B. Riley, which have reaffirmed ‘Buy’ ratings.

Nevertheless, since the market can sometimes overreact to some news, it’s important to assess the long-term potential of a stock and one of the best metrics that could help us in assessing this is the hedge fund sentiment. During the third quarter, American Eagle Outfitters experienced a slight increase in hedge fund interest, as it was included in the equity portfolios of 40 funds (among over 730 that we track) at the end of September. There were 36 hedge funds in our database with positions in the company at the end of the previous quarter.

In the financial world, there are a lot of signals that stock market investors have at their disposal to appraise their stock investments. Two of the most useful signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce the market by a superb margin (see the details here).

With this in mind, on the following page, we are going to take a closer look at the hedge fund sentiment towards American Eagle Outfitters (NYSE:AEO), according to the latest round of 13F filings.