UPDATE: Bank Of America Reiterates On Burlington Stores On Potential Debt Recap
In a report published Friday, Bank of America analyst Lorraine Hutchinson reiterated a Buy rating on Burlington Stores (NYSE: BURL), and raised the price target from $34.00 to $38.00.
In the report, Bank of America noted, “We see a high likelihood that Burlington will take advantage of lower available interest rates and reorganize its capital structure by early F2015. We estimate that a recapitalization could provide meaningful earnings upside. The company's $1.34bn of long-term debt currently has an annual cost of about 6.5%, and based on our calculations, each point of interest rate reduction from a recap adds $0.10 to annual EPS. We are updating our model to reflect a balance sheet recapitalization occurring in early 1Q15.
"We assume the cost of long-term debt improves by 100bp and adds $0.10 to our F2015 EPS estimate; we are now at $1.79. Our interest expense assumption could prove to be conservative, and we see room for additional upside potential. We are raising our Price Objective by $4 to $38 to reflect our higher estimates.”
Burlington Stores closed on Thursday at $31.01.
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