Market Overview

Burlington A Good Fit For Investors, Cowen Says After Q3 Print

Burlington A Good Fit For Investors, Cowen Says After Q3 Print

Burlington Stores Inc (NYSE: BURL) reported Wednesday with third-quarter results that arrived better than expected and helped push the stock higher by more than 10 percent.

What Happened

Burlington Stores said it earned $1.21 per share in Q3 on revenue of $1.63 billion versus expectations of $1.06 per share and $1.61 billion. The retailer revised its full year 2018 EPS outlook higher from a range of $6.13-$6.20 to a range of $6.33-$6.37. Same-store sales were higher by 4.4 percent in the quarter on a calendar-shifted basis.

Why It's Important

Burlington Stores' Q3 report signals that the stock remains a top idea into 2019 for six reasons, Cowen's John Kernan said in a Wednesday note. They are: 

  • An EPS beat that came in "well above" management's own guidance of $1-$1.04.
  • Same-store sales not only beat management's own guidance but resulted in a sequential improvement on its two-year stack from 5.3 percent in the first quarter to 7.5 percent.
  • Inventory remains "plentiful" in time for the holiday season.
  • Gross margin improvement did fall short at 17 basis points versus expectations for 40 basis points, while a freight headwind of 20 basis points partially offset the merchandise margin improvement of 40 basis points.
  • Burlington's guidance may be conservative, as its fourth-quarter outlook implies a two-year stacked same-store sales trend of 7.9-8.9 percent versus 7.6 percent in Q3.
  • The company benefited from remodels and a new store prototype.

What's Next

Burlington Stores is likely to be "blessed" in 2019 with low-double-digit EPS growth and the potential for further upside if same-store sales merely sustain their present levels, Kernan said.  

Cowen maintains an Outperform rating on Burlington Stores with an unchanged $195 price target.

The price target is based on a 15.3 times multiple on fiscal 2019 EV/EBITDA or 28 times 2019 EPS.

In the long run, the company has earnings potential of $12 per share on the basis successful current margin expansion initiatives and the eventual achievement of a low-double digit EBIT margin, according to the sell-side firm. 

Related Links:

Cowen: Kohl's, Target, Tiffany Are Top Holiday Retail Picks

Retail Picks: DA Davidson Bullish On PVH, TJX, Burlington, Canada Goose, Neutral On Lululemon

Photo courtesy of Burlington. 

Latest Ratings for BURL

Aug 2020MKM PartnersMaintainsBuy
Aug 2020Morgan StanleyMaintainsOverweight
Aug 2020Telsey Advisory GroupUpgradesMarket PerformOutperform

View More Analyst Ratings for BURL
View the Latest Analyst Ratings


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