Burlington Stores (BURL) Receives a Boost with Zacks Rank Upgrade to Buy

Burlington Stores, known by its ticker symbol BURL, has recently experienced a positive shift in its stock standing due to an upgrade by Zacks to a Rank #2, which signifies a 'Buy' status. This upgrade is a strong indicator of potential stock price growth and reflects an improvement in the company's earnings expectations.

Earnings Estimates: The Driving Force

The Zacks Rank is predominantly influenced by changes in a company's earnings projections. More specifically, it considers analysts' EPS (earnings per share) predictions for the current and forthcoming financial years via a consensus measure known as the Zacks Consensus Estimate.

While individual investors might struggle to act on the basis of Wall Street analysts' ratings upgrades—which could be perceived as subjective—the Zacks rating system offers a quantifiable approach. It focuses on the proven relationship between earnings estimate revisions and short-term stock price movements.

The Influence of Earnings Estimate Revisions

It has been observed that revisions in earnings estimates are strongly correlated with the immediate price movement of stocks. This is because institutional investors regularly adjust their valuation models based on earnings and projected earnings, buying or selling stocks accordingly. This activity, especially in large volumes, can lead to significant price changes.

Therefore, an upgrade in Zacks Rank for Burlington Stores, coupled with rising earnings estimates, suggests a positive business trajectory that is likely to result in stock appreciation by informed investors.

Harnessing Earnings Information

Using the trend in earnings estimate revisions can be an effective strategy for investment decisions, and the Zacks Rank stock-rating system is designed to capitalize on this. Four key factors related to earnings estimates are used in this system to categorize stocks into five ranks, ranging from a top 'Strong Buy' to a bottom 'Strong Sell' ranking.

Notably, Burlington Stores has seen a year-over-year estimated earnings increase of 22.1% to $7.40 per share for its fiscal year ending January 2025. Over the past three months, the consensus estimate for its earnings has gone up by 2.9%.

The Bottom Line

The Zacks rating system diverges from the often overly-optimistic bias of Wall Street analysts by maintaining an equal distribution of 'buy' and 'sell' ratings across thousands of stocks it covers. A stock's inclusion in the top 20% of the Zacks-covered stocks, signified by a Rank #1 or #2, indicates a favorable earnings estimate revision characteristic, suggesting it could yield returns above the market average in the near term.

With the elevation of Burlington Stores to a Zacks Rank #2, the company now stands among the top-tier stocks with promising earnings estimate revisions, hinting at a potential uptick in its stock performance moving forward.

Burlington, Earnings, Upgrade