Leggett & Platt Inc.
), which manufactures diversified engineered products and
components, has a legacy of strong dividend hikes and recently
announced a second straight quarterly earnings surprise. This Zacks
#2 Rank (Buy) should be attractive to investors seeking both growth
and income given its solid dividend yield of 4.3%, robust top and
bottom line projections for fiscal 2012, rising earnings momentum
and an expected long-term EPS growth rate of 15.0%.
Stellar Third Quarter
On October 29, Leggett & Platt reported third quarter earnings
per share of 45 cents, which beat the Zacks Consensus Estimate by
more than 18% and jumped 45% year over year.
Total sales rose 4% to $982.2 million year over year, marginally
exceeding the Zacks Consensus Estimate of $981 million. The robust
sales performance was primarily due to a 7% rise in same location
sales volumes. However, this advance was slightly impacted by a 4%
decline in revenue, which resulted from a slip in rod mill trade
sales and fluctuations in currency rates.
Gross profit for the quarter surged 20.6% to $205.5 million, while
gross margin expanded 280 basis points to 20.9%. Operating income
soared 47% to $104.9 million, benefiting from higher unit volumes,
diminished raw material costs in certain businesses, restructuring
activity in late 2011 and the acquisition of Western Pneumatic
Tube. Simultaneously, operating margin improved 310 basis points to
Leggett & Platt forecasts full-year 2012 earnings per share
between $1.45 and $1.52. Net sales are anticipated at $3.70 billion
to $3.75 billion. The company guided fourth quarter earnings per
share of 25 cents to 32 cents, with sales between $830 million and
Earnings Forecast on the Rise
All 6 earnings estimates for 2012 have been revised upward over the
past 30 days. The Zacks Consensus Estimate has advanced 6.4% to
$1.49. As for 2013, the Zacks Consensus Estimate remains stable at
$1.62. These estimates represent year-over-year growth of 33% for
2012 and 8.4% for 2013.
Leggett & Platt recently announced a quarterly dividend of 29
cents per share payable on December 27.
The company has been consistently raising its dividend since the
initiation of the payment in 1987. In August, the company announced
its 41st consecutive annual dividend increase, bringing its
annualized dividend to $1.16 per share, up 3.6% from the previous
The company's current dividend yields about 4.3%, being the highest
among the S&P 500 Dividend Aristocrats with more than 30
consecutive annual dividend increases. Furthermore, only 11 S&P
500 companies possess a history of higher consecutive annual
dividend increases than Leggett.
The valuation looks reasonable for Leggett & Platt, with shares
trading at 18.1x 12-month forward P/E, a discount of 3.7% with its
peer group average. However, on a price-to-book basis, shares are
currently trading at 2.7x, an 80% premium to the peer group average
Nevertheless, the stock looks attractive given a trailing 12-month
ROE of 14.7%, which is higher than the peer group average of 11.9%.
The company's long-term estimated earnings per share growth rate
also remains strong at 15.0%.
The chart below indicates steady growth in the company's share
price since June 25, reflecting an upside of about 38.5%. Shares of
Leggett & Platt have continually outperformed its 50 and
200-day moving averages since June and July, respectively. Average
volume also remains fairly strong at roughly 1,417K daily.
Founded in 1883 and headquartered in Carthage, Missouri, Leggett
& Platt is a global manufacturer that conceives, designs and
produces a broad variety of engineered components and products
found in homes, offices, retail stores and automobiles. The
company's most important product lines include components for
residential furniture and bedding, retail store fixtures and point
of purchase displays, and components for office furniture. It has a
market cap of $3.81 billion.
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