Morgan Stanley Says Burlington's 2016 Setup Its Best Since Stock's IPO

Morgan Stanley said the 2016 setup of Burlington Stores Inc BURL is its best since the 2013 IPO, given improved execution and secular tailwinds paving the way for ongoing positive EPS revisions.

The brokerage's comments came after Burlington delivered an impressive encore to its 19 percent first quarter EPS beat, revising second-quarter EPS guidance 35 percent higher on strong QTD trends.

Guidance

Burlington Stores raised its second-quarter comp guidance to +4.2–4.5 percent (vs. prior +2.5–3.5 percent) and adjusted EPS outlook to $0.28–$0.30 (vs. prior $0.20–$0.23), reflecting adjusted EBITDA $88 million–$90 million.

Related Link: Burlington Stores Will Continue To Win

"While we are encouraged by the significant 1H16 outperformance, the back-half setup looks equally (if not more) compelling," analyst Kimberly Greenberger wrote in a note.

Estimates, Justification

"Assuming BURL can sustain the 3-year comp trend and a mid-to-high teens incremental EBITDA flow through rate in 2H16, we see BURL delivering well-north of $3.00 EPS in 2016," Greenberger continued.

For now, the analyst raised his 2016 EPS estimate to $2.85 from $2.78 and 2017 EPS view to $3.25 from $3.15.

The analyst, who has an Overweight rating on the stock, also raised price target to $74 from $63.

At time of writing, shares of Burlington dropped modestly by 0.13 percent to $74.47.

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