On Monday, TD Cowen showed confidence in Burlington Stores' (NYSE:BURL) shares financial trajectory by increasing the company’s price target to $334 from the previous $288. The firm also maintained a Buy rating on the stock. The adjustment comes with an optimistic view of the company's potential to surpass consensus earnings per share (EPS) expectations through the fiscal year 2025 (FY25).
TD Cowen's stance is bolstered by Burlington Stores' demonstrated operating leverage, which suggests an upside to the consensus EPS forecasts. Despite a challenging third quarter (Q3) for the off-price retail sector, largely due to weather-related issues, the firm anticipates a rebound. More seasonal weather conditions in November and December are expected to support a reacceleration in sales.
The analyst highlighted Burlington Stores' inventory purchasing quality and enhanced in-store execution as particularly noteworthy. These factors are seen as key drivers behind the retailer's strong performance and future growth prospects.
Looking forward, TD Cowen has modeled a 23% compound annual growth rate (CAGR) in EPS for Burlington Stores. The firm also projects a path to $1 billion in annualized free cash flow (FCF) by the fiscal year 2028 (FY28). This ambitious target underlines the firm's belief in Burlington Stores' robust business model and its ability to generate significant cash over the coming years.
The maintained Buy rating and elevated price target reflect a positive outlook for Burlington Stores, as it continues to navigate the competitive retail landscape and capitalize on its strategic initiatives.
In other recent news, Burlington Stores has been making strategic financial moves and exceeding expectations in its performance. The company successfully amended its credit agreement, securing a $1.2 billion loan and extending its maturity date to 2031. This refinancing with JPMorgan Chase (NYSE:JPM) Bank and other lenders allows Burlington to manage its financial obligations with a longer horizon.
In terms of market performance, Burlington's Q2 results surpassed analyst estimates, with earnings of $1.24 per share against an average estimate of $0.96. Total (EPA:TTEF) sales growth of 13% was reported, driven by new store openings and a 5% increase in comparable store sales. This strong performance has led to upward revisions in full-year 2024 adjusted EPS guidance to $7.66-$7.96.
Several analyst firms have responded positively to these developments. Citi maintained its Buy rating on Burlington Stores and increased the price target to $313. Telsey Advisory Group raised its target to $310 while maintaining an Outperform rating, and Evercore ISI lifted its target to $315. JPMorgan set the highest target at $354.
These recent developments reflect Burlington Stores' proactive approach to managing its debt, its ability to navigate the financial markets to secure favorable terms, and its successful performance in a challenging retail landscape.
InvestingPro Insights
Burlington Stores' recent performance aligns with TD Cowen's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at 12.62% for the last twelve months, with quarterly revenue growth at 13.38%. This robust growth supports the analyst's positive stance on the company's trajectory.
InvestingPro Tips highlight that Burlington is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.67. This suggests potential undervaluation, which could justify TD Cowen's increased price target. Additionally, the company's strong return over the last year, with a 65.94% price total return, indicates momentum that could contribute to reaching the projected $334 price target.
The company's EBITDA growth of 31.9% over the last twelve months further supports the analyst's expectation of improved operating leverage and potential for surpassing EPS forecasts. With a market cap of $18.56 billion and trading near its 52-week high, Burlington appears well-positioned for the growth trajectory outlined by TD Cowen.
For investors seeking more comprehensive analysis, InvestingPro offers 15 additional tips for Burlington Stores, providing deeper insights into the company's financial health and market position.
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