Longbow Research Downgrades Tempur Sealy International to ‘Neutral’
Tempur Sealy International (TPX) has a market cap of $3.4 billion. It fell 22.4% to close at $57.77 per share on September 28, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -24.7%, -26.9%, and -18.0%, respectively, on the same day.
TPX is now trading 25.2% below its 20-day moving average, 23.4% below its 50-day moving average, and 9.7% below its 200-day moving average.
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Related ETF and peers
The SPDR S&P Homebuilders ETF (XHB) invests 4.4% of its holdings in Tempur Sealy. The ETF tracks a broad-based, equal-weighted index of US companies involved in the homebuilding industry. The YTD price movement of XHB was 0.04% on September 28.
The market caps of Tempur Sealy’s competitors are as follows:
- Newell Brands (NWL): $25.1 billion
- Steelcase (SCS): $1.7 billion
- Select Comfort (SCSS): $1.1 billion
Longbow Research has downgraded Tempur Sealy International’s rating to “neutral” from “buy” after the announcement of the company’s projections for fiscal 2016.
Performance of Tempur Sealy in 2Q16
Tempur Sealy reported 2Q16 net sales of $804.4 million, a rise of 5.2%, as compared to $764.4 million in 2Q15. The company’s gross profit margin and operating income rose 7.6% and 92.7% YoY (year-over-year), respectively, in 2Q16.
Its net income and EPS (earnings per share) rose to $21.3 million and $0.35, respectively, in 2Q16, as compared to $21.2 million and $0.34, respectively, in 2Q15. It reported adjusted EPS and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $0.92 and $124.7 million, respectively, in 2Q16, which is a YoY rise of 73.6% and 38.1%, respectively.
TPX’s cash and cash equivalents fell 10.4%, and its inventories rose 13.3% in 2Q16 over 4Q15. Its current ratio and debt-to-equity ratio rose to 1.3x and 16.2x, respectively, in 2Q16, as compared to 1.1x and 8.1x, respectively, in 4Q15.
The company has announced a $200 million increase in its share repurchase program. After the announcement of a share repurchase program on February 4, 2016, it repurchased ~4.4 million shares worth ~$256 million through July 27, 2016.
Tempur Sealy has made the following projections for fiscal 2016:
- net sales to fall 1%–3% YoY.
- adjusted EBITDA of $500 million–$525 million
- a 20% YoY rise in EPS
The company expects net sales of fiscal 3Q16 below expectation. It will announce its fiscal 3Q16 results on October 27, 2016.
In the next part, we’ll take a look at Select Comfort (SCSS).