The Daily Beat - December 3, 2025 📈

There were no S&P 500 earnings reactions on Tuesday, but we would like to update you on a setup we outlined in Sunday's Weekly Beat column.

Every now and then, a stock flips its script so dramatically that the market has no choice but to rerate the valuation. 

That’s exactly what’s happening at American Eagle $AEO....

This is a company that spent two full years getting punished for every single earnings event. Now it has suddenly become one of the most explosive turnaround stories in retail.

Last quarter, AEO delivered its best earnings reaction ever, ripping nearly 38% in a single session. 

It was the clearest possible signal that the market had officially stopped treating this stock like hot garbage and had begun rewarding the progress the business was making. 

And instead of fading, that strength is accelerating. 

This morning, AEO is ripping again on the heels of another double beat, confirming that last quarter’s move wasn’t a one-off. It was the birth of a new trend.

Before those big upside moves, AEO had suffered nine consecutive negative earnings reactions. Nine.

It was one of the longest beatdown streaks in the market, creating the perfect environment for a dramatic sentiment reversal once the fundamentals finally turned. 

That’s precisely why we follow earnings reactions so closely... 

They are the market’s most honest scoring mechanism. 

When a stock shifts from getting dumped for two years to posting back-to-back monster reactions, that’s the market telling you something has changed.

The fundamental data is backing this change in narrative.

*Image courtesy of AEO's latest investor presentation.

AEO just reported record Q3 revenue of $1.4B, up 6% year over year, driven by a 4% comp increase across the business. 

Aerie continues to be the growth engine, posting another 11% comp increase, while the core American Eagle brand swung back to positive territory with a 1% comp gain. 

Management highlighted “a significant trend change across our business” powered by better merchandising, tighter operations, and a surge in marketing effectiveness. 

The company also raised its Q4 operating-income guidance to $155–$160M on the back of an excellent start to the holiday season. 

Fundamentals don’t turn in a vacuum... 

AEO didn’t just change what it’s selling, it changed how it’s selling it. 

The company leaned hard into cultural marketing this year, launching massive campaigns with Sydney Sweeney, Travis Kelce, and Martha Stewart. 

And while the Sweeney campaign stirred its fair share of controversy, it also delivered measurable, undeniable results. 

The collaborations generated over 44B impressions, drove a surge in store and digital traffic, and even triggered denim shortages when the jeans Sweeney wore in the ads sold out in two days.

Denim is having a cultural moment, and American Eagle, one of the category’s most trusted brands, is sitting right in the center of it. 

What's more, it's not just the fundamentals and earnings reactions that have shifted.

AEO is gapping-n-going.

After spending 2025 carving out a massive bearish-to-bullish reversal pattern, last night's earnings report was the catalyst for a breakout. 

Now the path of least resistance is higher for the foreseeable future.

The fundamentals turned, and the market agrees.

AEO is a textbook example of the power of fusion analysis. It's why we built The Beat Report.

Happy Wednesday!

-The Beat Team