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MKM Upgrades Burlington To Buy, Sees 'Sizable Opportunity For Earnings Upside'

Burlington Stores NYSE:BURL - MKM Upgrades Burlington To Buy, Sees 'Sizable Opportunity For Earnings Upside'

MKM Partners’ Roxanne Meyer believes there is a “sizable opportunity” for Burlington Stores Inc (NYSE: BURL) to deliver earnings upside from multiple levers.

Meyer upgraded the rating for the company from Neutral to Buy while raising the price target from $73 to $94.

Multiple Levers

“Following two quarters of comp beats and even more impressive margin and earnings flow-through, we better appreciate BURL’s multiple levers to drive industry-leading earnings growth,” the analyst explained.

Apart from macro factors, including inventory availability and the growing customer demand for off-price, Meyer believes there are several “internally driven” catalysts that are driving comp gains for Burlington Stores, such as category growth, improving vendor base and mix of brands, enhanced in-store environment, better marketing and inventory discipline.

Comp Strength

The company reported comp of 5.4 percent for Q2, ahead of the guidance, driven by broad-based strength and extending the Q1 trends.

“Importantly, traffic continues to support comps, now up in seven of the last eight quarters,” Meyer stated.

The analyst believes there are catalysts that would drive continued comp growth, such as the continued refinement of the off-price model and significant growth in the home and beauty categories, among others.

Better Appreciation Of Earnings Potential

Meyer went on to say there now was “a better appreciation of the opportunity still ahead to improve margins (and earnings) from a combination of better-than-expected comps, inventory management, and improved execution.”

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DateFirmActionFromTo
Aug 2016Buckingham ResearchMaintainsBuy
Aug 2016Cowen & CompanyMaintainsOutperform
Aug 2016BMO CapitalMaintainsOutperform

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