Ahead Of The Bell: Sealy's Preliminary Results

NEW YORK (AP) — An analyst applauded Sealy Corp.'s preliminary gross margin and operating income results on Friday, but cautioned that the mattress maker will likely be weighed down by a convertible rights offering for a while.

Late Thursday, Trinity, N.C.-based Sealy said it expects a second-quarter gross profit margin of 40.1 percent to 41.1 percent and operating income of $28 million to $30 million. The company anticipates revenue of $294 million to $301 million.

SunTrust Robinson Humphrey's Keith Hughes projected a gross margin of 38.1 percent and revenue of $283.1 million for the period.

Hughes said in a client note that the mattress maker's gross margin and operating income results "position Sealy to see improvement if volumes can just bottom out."

But Hughes said that the convertible rights offering may be a burden. Last month Sealy gave stockholders transferable subscription rights to buy up to about $177.1 million of its senior secured third lien convertible notes due 2016. The offering is set to expire on July 2.

"Until the company completes a reverse split or if the convertible feature of the bonds is ified in a few years, Sealy is destined to be a single-digit stock," he said.

Hughes reiterated a "Neutral" rating.

Sealy is scheduled to release its second-quarter results on June 30.

Shares of Sealy advanced 50 cents, or 27.8 percent, to $2.30 in premarket activity Friday. The stock has ranged from 43 cents to $8.41 over the past year.