On Wednesday, TD Cowen sustained its positive stance on Burlington Stores (NYSE:BURL), maintaining a Buy rating with a $334.00 price target. The firm's analysis suggests that if Burlington achieves a same-store sales (SSS) growth of 3% to 4% in fiscal year 2025 and beyond, there could be potential for earnings per share (EPS) to surpass the consensus expectations. This outcome would be driven by a consistent margin expansion, anticipated to result in a mid 20%+ compound annual growth rate (CAGR) for EPS over five years.
Burlington's strategy, referred to as Burlington 2.0, has been successful in expanding margins without a substantial increase in the SSS plan. TD Cowen's projections include a 3% increase in SSS for fiscal year 2025 and a year-over-year EPS growth of 21%. The price target of $334 is based on 28 times the firm's estimated fiscal year 2026 EPS and 14 times the estimated enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA).
The retailer's focus on Burlington 2.0 involves operational improvements aimed at enhancing profit margins. This approach has been effective even without significant growth in same-store sales, which is a key metric for retailers as it indicates the performance of existing store locations.
The financial modeling by TD Cowen underscores a positive outlook for Burlington Stores, with the anticipated SSS growth and EPS increase reflecting confidence in the company's operational strategy and financial health. The $334 price target remains unchanged, reaffirming the firm's expectation of Burlington's continued performance and value growth.
In other recent news, Burlington Stores has reported an 11% increase in total sales and a 41% rise in adjusted earnings per share to $1.55 for the third quarter. Despite weather-related challenges, the company's comparable store sales grew by 1%, slightly below the anticipated 2% increase. Burlington Stores has been expanding, opening 147 new stores with projections for 101 net new stores by year-end. The company aims to add 500 new stores between 2024 and 2028.
Burlington Stores has also been the subject of several analysts' reports following their third-quarter earnings announcement. Baird maintained its Outperform rating on Burlington Stores, highlighting the company's ability to meet earnings expectations and effective margin management. Telsey Advisory Group, Evercore ISI, and Citi raised their price targets on Burlington Stores, citing strong operating margins and resilience despite weather-related sales challenges.
In another recent development, Burlington Stores appointed Shira Goodman, former CEO of Staples, to its Board of Directors and Audit Committee, effective January 1, 2025. Goodman's extensive retail industry experience is expected to enhance the board's oversight of the company's strategic growth initiatives.
InvestingPro Insights
Burlington Stores' recent performance aligns with TD Cowen's optimistic outlook. According to InvestingPro data, the company has demonstrated strong financial results, with a revenue of $10.47 billion in the last twelve months as of Q3 2023, representing a 12.2% growth. This robust revenue growth supports the potential for the 3-4% same-store sales increase projected by TD Cowen for fiscal year 2025 and beyond.
The company's profitability is also noteworthy, with a gross profit margin of 43.24% and an operating income margin of 6.38% in the same period. These figures suggest that Burlington's strategy to expand margins, as mentioned in the article, is yielding positive results.
InvestingPro Tips highlight that Burlington is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.68. This indicates that the stock may be undervalued considering its growth prospects, which aligns with TD Cowen's bullish stance and price target.
Moreover, Burlington has shown a strong return over the last year, with a 67.14% price total return. This performance, coupled with the fact that the stock is trading near its 52-week high (95.9% of the high), reflects investor confidence in the company's strategy and future prospects.
For readers interested in a deeper analysis, InvestingPro offers 14 additional tips for Burlington Stores, providing a comprehensive view of the company's financial health and market position.
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