03:23 PM EDT, 08/20/2024 (MT Newswires) -- American Eagle Outfitters' ( AEO ) price-to-earnings ratio is expected to rise as the company is likely to report strong Q2 sales, UBS Securities said in a note emailed Tuesday.

"Our channel checks suggest [American Eagle Outfitters' ( AEO )] [Q2] sales were solid, the back-to-School season has been favorable, and denim remains a solid fashion trend," UBS said. It expects a small Q2 EBIT beat and only a $10 million boost in 2024 EBIT guidance due to better-than-expected margins.

Mixed sentiment on the clothing retailer, with a positive crowding score offset by high short interest and bearish options are leading UBS to expect a small Q2 beat and a modest 2024 guidance increase.

"UBS Quant team's crowding data shows AEO's crowding score is 11.2, above the Softlines average of 3.7. This indicates sentiment is positive," UBS said. However, the short interest at 12.3% is higher than industry average.

UBS maintained a buy rating on American Eagle Outfitters ( AEO ) with a price target of $35.

Price: 21.25, Change: -0.11, Percent Change: -0.49