Burlington Stores (BURL) strong fiscal Q2 results backed by top line growth and margin expansion are reinforcing the company's growth algorithm, UBS Securities said in a Thursday note.

The company delivered 38% EPS growth, building on a 39% increase a year earlier, which UBS viewed as the result of an effective "Burlington 2.0" strategy.

UBS analysts noted the management's decision to invest tariff refunds in sharper values could pressure next year's earnings when there is no tariff refund to offset the investment, but management expects to grow its EBIT margin from the current fiscal 2026 base expectation.

Burlington's 2% Q2 comparable sales growth trailed Ross Stores' (ROST) 10%, but total sales growth was 10% compared with 13% for Ross as Burlington continues opening new stores, the firm said.

UBS models fiscal Q3 EPS estimate of $1.70, compared with its previous forecast of $1.95.

UBS maintained its buy rating on Burlington Stores and a $440 price target.

Burlington Stores shares were 5% lower in Friday trading.

Price: 274.30, Change: -15.70, Percent Change: -5.41