Burlington stock target cut to $301 by TD Cowen, retains Buy rating

On Friday, TD Cowen analyst John Kernan adjusted the price target for Burlington Stores (NYSE:BURL) to $301 from the previous $301, maintaining a Buy rating on the retailer’s shares. The $14.36 billion market cap company currently trades at a P/E ratio of 27.6x, with analyst consensus strongly favoring a Buy recommendation at 1.38. According to InvestingPro analysis, the stock appears slightly overvalued at current levels. Kernan’s adjustment follows a detailed examination of Burlington’s recent quarterly performance and forward-looking statements, which included commentary on potential macroeconomic and consumer challenges.

In his analysis, Kernan pointed out that while Burlington’s second-quarter comparable store sales showed a modest increase of 1% for April and May, the company experienced a significant 15% intraday stock price drop from its highs. InvestingPro data reveals the stock’s high volatility with a beta of 1.7, and it’s currently trading near its 52-week low. The conference call with management highlighted macroeconomic concerns and potential consumer spending headwinds as contributing factors to the stock’s volatility. For deeper insights, InvestingPro offers 8 additional key tips and a comprehensive Pro Research Report, available with a subscription.

Despite the reduction in price target, Kernan remains optimistic about Burlington’s prospects for the second half of the year. He suggests that buying opportunities and favorable weather could bolster same-store sales (SSS). The company has demonstrated solid revenue growth of 8.31% over the last twelve months, supporting this optimistic outlook. However, he has revised his financial estimates for fiscal years 2025 and 2026, albeit still maintaining projections above the consensus.

Burlington reported flat comparable store sales in the first quarter, which were on top of a 2% increase in the same period last year. The company’s sales growth of 6% year-over-year and comparable sales both met the midpoint of the guidance provided. Gross margin for the quarter was reported at 43.8%, an increase of 30 basis points year-over-year. This improvement was attributed to a 30 basis point expansion in merchandise margin and a 10 basis point benefit from freight.

The adjusted earnings per share (EPS) for the quarter came in at $1.67, excluding costs related to acquired leases. This figure surpassed TD Cowen’s estimate of $1.53 and the consensus of $1.43. Management’s effective strategies were credited for driving a 30 basis point expansion in EBIT margin despite flat comparable store sales.

In other recent news, Burlington Stores has maintained its full-year earnings guidance while providing insights into its financial performance and strategic outlook. UBS has reaffirmed its Buy rating with a $390 price target, emphasizing the company’s consistent adjusted earnings per share (EPS) guidance for fiscal year 2025, which aligns with the sell-side’s estimate. BMO Capital Markets has also maintained its Outperform rating, with a $277 price target, acknowledging Burlington’s ability to exceed profit expectations in the first quarter despite a slight sales miss. Bernstein has adjusted its price target to $365, maintaining an Outperform rating, and highlighted Burlington’s potential for significant EPS growth through 2028 despite short-term challenges.

Telsey Advisory Group has reduced its price target to $300 while keeping an Outperform rating, noting that Burlington’s gross margin exceeded forecasts and the company is strategically expanding its retail locations. Morgan Stanley (NYSE:MS) has made a slight adjustment to its price target, reducing it to $267, but continues to hold an Overweight rating, reflecting confidence in the company’s long-term growth and margin expansion. Burlington Stores’ recent financial results have been positively received by analysts, with various firms expressing optimism about the company’s strategic positioning and potential for future earnings growth. The ongoing focus on managing expenses and capitalizing on market opportunities appears to bolster Burlington’s prospects in a challenging retail environment.

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