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 via acquisitions that would help it augment its
A well-diversified customer base, pricing power and solid
research and development (R&D) capabilities facilitate
Leggett & Platt to float in the soft economic environment. In
order to focus more on its core business operations and improve
financial flexibility, the company is continuously taking
strategic actions to add new products to its portfolio as per the
consumers' changing preferences while simultaneously divesting
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 growth.
However, we are disappointed with the company's third-quarter
2013 performance as earnings declined 4.4% to 43 cents per share
impacted by lower sales and negative comps. Results were also
impacted by the exclusion of the acquisition gain in the quarter.
Driven by the weak third-quarter performance, the company tweaked
its sales and earnings per share guidance for fiscal 2013. The
company now expects sales to rise 1% to $3.75 billion, against
the previous forecast of $3.75-$3.85 billion. Adjusted EPS is
expected to come in the range of $1.50-$1.55, compared with the
prior guidance of $1.50-$1.65.
The company's lowered guidance also pulled down the Zacks
Consensus Estimate for fiscal 2013 and 2014. Currently, the Zacks
Consensus Estimate for fiscal 2013 and 2014 is pegged at $1.53
and $1.74 per share, respectively, decreasing 1.9% and 1.7%, over
the last 30 days.
We also remain concerned about increasing material costs, intense
competition and exposure to adverse foreign currency
translations. The company operates in a competitive environment
and strives to maintain its market share, actively competing with
numerous manufacturers and distributors of consumer and
Given the pros and cons in the stock we prefer to remain on the
sidelines, and maintain our Neutral recommendation.
Other Stocks to Consider
Leggett currently has a Zacks Rank #4 (Sell). However, other well
performing stocks in the consumer discretionary sector include
Mohawk Industries Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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