Just How Bad Will Aeropostale's Earnings Be On Thursday?

| About: Aeropostale, Inc. (ARO)

Aeropostale Inc. (NYSE:ARO) is set to report FQ4 2014 earnings after the market closes on Thursday, March 13th. Aeropostale is primarily a shopping mall based clothing retailer which targets teenagers and young adults. This winter has been hard on retailers as many have cited snowstorms and the extreme cold for reduced customer traffic and poorer than expected sales. Aeropostale shareholders have been in for a rough past 3 quarters as the company's stock price has fallen nearly 56% from a high in May of $16.41 to a current price of $7.25. Aeropostale has seen its EPS and revenue fall on a year over year basis on each of the past 4 quarters. This quarter Wall Street is expecting Aeropostale's sales to drop 12% compared to last year and losses are expected to increase by 6c per share. Here's what investors are expecting from Aeropostale on Thursday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.image

(Click Here to see Estimates and Interactive Features for Aeropostale)

The current Wall Street consensus expectation is for ARO to report -30c EPS and $698.54M revenue while the current Estimize.com consensus from 11 Buy Side and Independent contributing analysts is -28c EPS and $694.57M in revenue. This quarter the buy-side, as represented by the Estimize.com community, is expecting Aeropostale to beat the Wall Street consensus on EPS but come up short on revenue.

By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, we have created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a slightly larger than usual difference between the 2 groups' expectations.image

The distribution of estimates published by analysts on the Estimize.com platform range from -32c to -25c EPS and from $671.00M to $706.47M in revenues. This quarter we're seeing a larger than usual distribution of estimates on ARO.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings. image

Over the past 4 months the Wall Street EPS consensus dropped from -11c to -30c while the Estimize consensus remained flat at -28c. Meanwhile, the Wall Street revenue forecast fell from $735.49M to $698.54M, while the Estimize forecast pushed marginally higher from $693.00M to $694.57M. Timeliness is correlated with accuracy and downward analyst revisions going into an earnings report are often a bearish indicator.image

The analyst with the highest estimate confidence rating this quarter is turbinecity who projects -29c EPS and $701.54M in revenue. In the Winter 2014 season turbinecity is the highest rated analyst and is ranked 7th overall among over 3,950 contributing analysts. This season turbinecity has been more accurate than the Street in forecasting EPS and revenue 61% and 59% of the time respectively throughout over 1200 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case turbinecity is expecting ARO to beat the Estimize consensus on revenue but come up short of the community's expectations on EPS.

This quarter the buy side as represented by the Estimize community is lowering its expectation for Aeropostale's 4th quarter sales. While Wall Street is calling for $698.54M in revenue, contributing analysts on the Estimize.com platform are only expecting $694.57M in sales but also expect Aeropostale to lose 2 fewer cents per share than the Street has predicted.

Disclosure: No positions