What Happened:

Shares of young adult apparel retailer American Eagle Outfitters (NYSE:AEO) jumped 14.8% in the pre-market session after the company reported fourth-quarter results, which exceeded analysts' revenue and EPS expectations. Outperformance was driven by its Aerie brand, which saw same-store sales growth of 13% compared to 6% for the flagship American Eagle brand, which is still good. 

Looking ahead, management expects revenue to rise by 3% in the full year 2024, falling short of analysts' estimates. However, its forecasted full-year operating income of $455 million easily cleared analysts' expectations of $362 million. Overall, this quarter's results seemed fairly positive, and shareholders should feel optimistic. After the initial pop the shares cooled down to $24.41, up 4% from previous close.

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What is the market telling us:

American Eagle's shares are not very volatile than the market average and over the last year have had only 14 moves greater than 5%. But moves this big are very rare even for American Eagle and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 15.6% on the news that the company reported third quarter results and provided operating income guidance for the full year that fell short of expectations. 

On the other hand, it beat analysts' revenue and EPS estimates this quarter, driven by better-than-expected same-store store sales growth at both American Eagle and Aerie. The decline suggested expectations for the year ahead were high heading into the quarter and the earnings beat was already priced into the stock.

American Eagle is up 15.2% since the beginning of the year. Investors who bought $1,000 worth of American Eagle's shares 5 years ago would now be looking at an investment worth $1,150.

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