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Can Burlington Stores’ Earnings Continue to See Strong Growth?

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Strong growth rate

Burlington Stores (BURL) has been delivering strong earnings growth for the past several quarters. Excluding one-time items, its adjusted EPS of $1.15 in the second quarter of fiscal 2018[1. Fiscal Q2 2018 ended on August 4, 2018.] was significantly ahead of analysts’ expectation of $0.96. Its fiscal second-quarter adjusted EPS grew 59.7% year-over-year from $0.72.

Excluding the impact of a $0.06 gain related to the revaluation of deferred tax liabilities, its adjusted EPS was $1.09 in the fiscal second quarter.

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Key drivers

Burlington Stores’ impressive adjusted EPS growth in the second quarter of fiscal 2018 was driven by higher sales, improved gross margin, and efficient expense control. Lower taxes also boosted its bottom line. Its adjusted effective tax rate was 12.6% in the second quarter of fiscal 2018 compared to 26.8% in the second quarter of fiscal 2017.

Burlington Stores’ fiscal second-quarter EPS also benefited from a lower share count due to the impact of share repurchases. Its weighted average diluted shares outstanding were 68.8 million at the end of the second quarter of fiscal 2018 compared to 70.8 million at the end of the second quarter of fiscal 2017.

Earnings outlook

Following its strong fiscal second-quarter results, Burlington Stores increased its adjusted EPS guidance to $6.13–$6.20 compared to the previous outlook of $5.90–$6. Excluding the gain related to the revaluation of deferred tax liabilities, the company expects its adjusted EPS to be $4.94–$5.01. It expects its fiscal third-quarter adjusted EPS to be $1–$1.04 compared to $0.70 in the third quarter of fiscal 2017.

Analysts expect Burlington Stores’ fiscal third-quarter adjusted EPS to grow 51.4% to $1.06 and its fiscal fourth quarter adjusted EPS to rise 27.6% to $2.77. For fiscal 2018, analysts expect adjusted EPS to grow 42.6% to $6.23.

We’ll look at Burlington Stores’ valuation in the next part of this series.

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