American Eagle Outfitters (NYSE: AEO) and Carter’s (NYSE:CRI) are both mid-cap cyclical consumer goods & services companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, valuation, analyst recommendations, risk, earnings, dividends and institutional ownership.
This is a breakdown of recent ratings and recommmendations for American Eagle Outfitters and Carter’s, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|American Eagle Outfitters||2||7||10||0||2.42|
This table compares American Eagle Outfitters and Carter’s’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|American Eagle Outfitters||4.85%||18.25%||12.17%|
Insider and Institutional Ownership
81.6% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 98.4% of Carter’s shares are held by institutional investors. 5.9% of American Eagle Outfitters shares are held by company insiders. Comparatively, 3.1% of Carter’s shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.
Earnings and Valuation
This table compares American Eagle Outfitters and Carter’s’ top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||NetIncome||Earnings Per Share||Price/Earnings Ratio|
|American Eagle Outfitters||$3.61 billion||0.75||$212.44 million||$0.96||15.88|
|Carter’s||$3.20 billion||1.57||$258.10 million||$5.20||20.45|
Carter’s has higher revenue, but lower earnings than American Eagle Outfitters. American Eagle Outfitters is trading at a lower price-to-earnings ratio than Carter’s, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
American Eagle Outfitters has a beta of 1.09, indicating that its share price is 9% more volatile than the S&P 500. Comparatively, Carter’s has a beta of 0.33, indicating that its share price is 67% less volatile than the S&P 500.
American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 3.3%. Carter’s pays an annual dividend of $1.48 per share and has a dividend yield of 1.4%. American Eagle Outfitters pays out 52.1% of its earnings in the form of a dividend. Carter’s pays out 28.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Carter’s has raised its dividend for 3 consecutive years.
Carter’s beats American Eagle Outfitters on 12 of the 17 factors compared between the two stocks.
About American Eagle Outfitters
American Eagle Outfitters, Inc. (AEO Inc.) is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom. Its other brands include Tailgate and Todd Snyder New York. Tailgate is an apparel brand with a college town store concept. Todd Snyder New York is a menswear brand. As of January 28, 2017, the AEO brand operated 943 stores and online at www.ae.com.
Carter’s, Inc. (Carter’s) is a marketer of apparel for babies and young children in the United States and Canada. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh B’gosh (OshKosh). The Company operates through five segments: Carter’s Retail, Carter’s Wholesale, OshKosh Retail, OshKosh Wholesale and International. Its International segment includes company-operated retail stores and online Websites, wholesale operations, and royalty income from its international licensees. It markets products for consumers, and offer various product categories, including baby, sleepwear, play clothes, and related accessories. Its multi-channel international business model – retail stores, online and wholesale – enables it to reach a range of consumers around the world. As of December 31, 2016, its channels included approximately 18,000 wholesale locations, 792 stores in the United States, 164 stores in Canada, and its Canadian and the United States Websites.
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