Neutral Stance on Leggett & Platt - Analyst Blog
February 19 2013 - 8:10AM
Zacks
Leggett & Platt,
Incorporated (LEG), the manufacturer of diversified
engineered products and components, remains on our Neutral list as
it continues to post robust bottom line performance and provided an
impressive fiscal 2013 forecast. Its strategy to optimize capital
allocation and increased focus on core businesses are also
noteworthy. However, we remain concerned regarding the increasing
material costs, intense competition and exposure to adverse foreign
currency translations.
Why
Reiterate?
Leggett reported earnings of 32
cents per share for the fourth quarter 2012, which surged 45% from
the comparable year-ago quarter and also swept past the Zacks
Consensus Estimate of 29 cents. The year-over-year increase was
mainly driven by a sturdy operational performance that comprised
superior volume and margin growth, better cost management and the
acquisition of Western Pneumatic Tube. The average positive
surprise in the trailing four quarters comes to 7.71%.
Buoyed by strong quarterly results,
management expects full-year 2013 earnings per share to be between
$1.50 and $1.75, representing a significant rise from earnings per
share of $1.46 reported in 2012. Currently, the Zacks Consensus
Estimate for 2013 stands at $1.62 per share. Net sales are
anticipated in the range of $3.75–$3.95 billion, reflecting growth
of 1%–6%.
Further, we believe that Leggett
has a well-diversified customer base and solid research and
development (R&D) capabilities, offering a competitive edge
while strengthening its pricing power in the market. Moreover, in
order to enhance the core business operations and improve financial
flexibility, Leggett is continuously taking strategic actions to
add new products to its portfolio as per the consumers’ changing
preferences while simultaneously divesting low-performing
businesses.
On the flip side, the company
operates in a competitive environment and strives to maintain its
market share, actively competing with numerous manufacturers and
distributors of consumer and commercial products. The company’s
primary traits to compete in the environment include focus on
pricing, big consumer brands, introduction of new products, and
customer service.
While our recommendation on Leggett
is based on various positives mentioned above, soft economic
recovery, threats of competition and foreign currency translation
keep us on the sidelines. The company carries a Zacks Rank #3
(Hold).
Other Stocks Worth
Considering
Other stocks worth considering in
the home furnishing-appliances industry are Sealy
Corporation (ZZ), Whirlpool Corporation
(WHR) and Virco Mfg. Corporation (VIRC). All these
companies hold a Zacks Rank #1 (Strong Buy).
LEGGETT & PLATT (LEG): Free Stock Analysis Report
VIRCO MFG (VIRC): Get Free Report
WHIRLPOOL CORP (WHR): Free Stock Analysis Report
SEALY CORP (ZZ): Free Stock Analysis Report
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