Leggett & Platt Inc
), the manufacturer of diverse engineered products and
components, remains on our Neutral list with a price target of
$31.00 per share.
We commend Leggett's consistent endeavors to keep itself on
the growth trajectory through acquisitions that would help it
augment its top-line performance.
A well-diversified customer base, pricing power and solid
research and development (R&D) capabilities facilitate
Leggett & Platt to keep itself afloat in the soft economic
environment. In order to increase its focus on core business
operations and improve financial flexibility, the company is
continuously taking strategic action to add new products to its
portfolio as per the consumers' changing preferences while
simultaneously divesting low-performing businesses.
Further, we remain impressed by the company's strong financial
base, which enables it to make profitable ventures as well as
return value to shareholders. We believe that the company's
sustained focus on adding new products while simultaneously
divesting low-performing businesses bode well for future
Owing to its strategic endeavors, the company, which competes
American Woodmark Corp.
), recently reported better-than-expected quarterly results with
sales and earnings of $896.8 million and 35 cents per share,
respectively, which was better than the year-ago comparable
quarter figure as well as the Zacks Consensus Estimate.
However, we are concerned about rising raw material costs,
which have adversely impacted the company's margins over the past
few quarters. Leggett's operating performance is greatly
dependent on the price of raw materials, particularly steel.
Global steel markets are cyclical in nature and the price of
steel has witnessed extreme volatility in the recent years,
leading to significant fluctuations in the company's margins.
During the fourth quarter, the company witnessed a 230-bps
year-over-year contraction in its gross margin. A continuation of
this trend could weigh on the company's operating
Moreover, intense competition from global and regional players
as well as exposure to foreign exchange rates may undermine the
company's performance going forward.
Given the pros and cons in the stock, we prefer to remain on
the sidelines and thereby maintain our Neutral
Other Stocks to Consider
Leggett currently has a Zacks Rank #3 (Hold). Some
better-performing stocks in the consumer discretionary sector
Hooker Furniture Corp.
Virco Mfg. Corp
). While Hooker Furniture carries Zacks Rank #1 (Strong Buy),
Virco Mfg has a Zacks Rank #2 (Buy).
AMER WOODMARK (AMWD): Free Stock Analysis
HOOKER FURNITUR (HOFT): Free Stock Analysis
LEGGETT & PLATT (LEG): Free Stock Analysis
VIRCO MFG (VIRC): Get Free Report
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