Bedding Companies May Begin Sleeping a Little Better

Since hitting 52-week highs in mid-April, mattress and bedding companies have moved sharply lower. The highs followed solid first-quarter earnings reports, and the direction change followed a warning on earnings from Tempur Pedic International Inc. (NYSE: TPX) in early June. Today’s earnings report from Tempur Pedic may have turned things around yet again.

The company managed to beat a FactSet EPS estimate of $0.38, posting EPS of $0.45 on revenue of $329.5 million. Based on Tempur Pedic’s June warning, no one expected much, so the lower revenue and modest profit were a welcome surprise. Other mattress and bedding makers Select Comfort Corp. (NASDAQ: SCSS), Sealy Corp. (NYSE: ZZ), Mattress Firm Holding Corp. (NASDAQ: MFRM), and Leggett & Platt Inc. (NYSE: LEG) are all getting a boost as well today.

Sealy is up more than 7% following its own earnings beat a few weeks ago and Select Comfort is up more than 2% following on its big jump last week following its own earnings report.

Tempur Pedic’s gross margins fell -2.2% to 50.7%, and international sales growth rose 8% to offset a decline of -8% in the US. International sales grew by 17% on a constant currency basis. The company also stuck by its full-year EPS forecast of about $2.80/share on revenue of about $1.43 billion. The EPS forecast is above the Thomson Reuters estimate of $2.66.

Earnings estimates for both Select Comfort and Sealy were raised following their earnings reports. Mattress Firm Holding’s second quarter ends this month and the company is expected to post EPS of $0.28 on revenue of $246.5 million. Leggett & Platt, which makes bedsprings, is expected to report EPS of $0.36 on revenue of $978.9 million tomorrow.

Tempur Pedic’s stock is up 14.2% at $30.96 shortly after noon today, in a 52-week range of $20.70-$87.43. The stock’s consensus target price is $31.25, still a long way from the 52-week high.

Paul Ausick