Shares of Tempur Sealy are lower by 1.63% to $70.01 in early trading on Friday morning.
The mattress maker and retailer may improve its financial results in the second half of 2015, Cantor Fitzgerald said in an analysts note.
Management changes and lower margins, however, make this year's results unclear.
Additionally, Tempur Sealy completed the integration of Sealy, which was acquired in 2013 for $1.3 billion, but has not fully taken advantage of the synergies available, according to analysts.
The company now commands a 31% market share in the U.S., making it the second largest mattress company, but could do more to enhance its position in the industry, analysts added.
Tempur Sealy announced today that it will release its 2015 second quarter earnings report on July 30 after the market close.
Separately, TheStreet Ratings team rates TEMPUR SEALY INTL INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TEMPUR SEALY INTL INC (TPX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TEMPUR SEALY INTL INC's earnings per share declined by 13.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TEMPUR SEALY INTL INC increased its bottom line by earning $1.75 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($3.09 versus $1.75).
- 40.09% is the gross profit margin for TEMPUR SEALY INTL INC which we consider to be strong. Regardless of TPX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TPX's net profit margin of 3.16% compares favorably to the industry average.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Household Durables industry and the overall market, TEMPUR SEALY INTL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: TPX Ratings Report