Leggett & Platt - Growth & Income

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Leggett & Platt Inc. ( LEG ) recently raised its quarterly dividend by a penny or 3.6% to 29 cents per share, marking the 41st consecutive annual dividend increase and reflecting a 13% compound annual growth rate. This diversified engineered products and components manufacturer also announced a positive earnings surprise of nearly 18.4% for the third quarter of 2012.

A solid dividend yield of 4.3%, robust top and bottom line projections, rising earnings momentum over the past week and an expected long-term earnings per share growth rate of 15.0% make this Zacks #2 Rank (Buy) an attractive pick for investors seeking both growth and income.

Stellar Third Quarter

On October 29, Leggett & Platt reported record third quarter earnings per share of 45 cents, rising sharply by 45% year over year and beating the Zacks Consensus Estimate of 38 cents. The better-than-expected results were mainly driven by a sturdy operational performance that comprised superior volume and margin growth.

Total sales climbed 4% to $982.2 million compared with $940.9 million in the year-ago period, while it marginally exceeded the Zacks Consensus Estimate of $981 million. The robust sales performance came from a 7% rise in same location sales volumes. However, this increase 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% year over year to $104.9 million, benefiting from higher unit volumes, diminished raw material costs in certain businesses, late-2011 restructuring activity and the acquisition of Western Pneumatic Tube. Simultaneously, operating margin improved 310 basis points to 10.7%.

Leggett & Platt forecasted full-year 2012 earnings per share between $1.45 and $1.52, representing a significant rise from earnings per share in the trailing four years of 62 cents, 70 cents, $1.15 and $1.04. 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 coming in the $830 million - $880 million range.

Earnings Momentum on the Rise

All 5 estimates for 2012 have been revised upward over the past 7 days, sending the Zacks Consensus Estimate higher by 6.4% to $1.49. Similarly, the Zacks Consensus Estimate for 2013 is up 3.7% to $1.68 as 5 of 6 estimates moved higher. These estimates represent year-over-year growth of 33% for 2012 and 13% for 2013.

Eye-Catching Dividend

Leggett & Platt has been consistently raising its dividend since the initiation of the payment in 1987. In August, the company announced its 41st annual dividend increase, bringing its annualized dividend to $1.16 per share, up 3.6% from the previous level.

The company's current dividend yields about 4.3%, the highest among the S&P 500 Dividend Aristocrats with more than 30 consecutive annual dividend increases. Furthermore, only 11 members of the S&P 500 possess a history of higher consecutive annual dividend increases than Leggett & Platt.

Reasonable Valuation

Valuation looks reasonable for Leggett & Platt, with shares trading at 18.6x 12-month forward P/E, on par with its peer group average. However, on a price-to-book basis, shares are currently trading at 2.8x, a 75% premium to the peer group average of 1.6x.

Nevertheless, the stock looks attractive given a trailing 12-month ROE of 13.3%, 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%.

Chart

The chart below indicates steady growth in the company's share price since June 25, 2012, reflecting an upside of about 39.5%. 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 1,470K 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 line includes 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 $3.26 billion.


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LEGGETT & PLATT (LEG): Free Stock Analysis Report

LEGGETT & PLATT (LEG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

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