Tempur-Pedic International (
Back on February 3rd, I highlighted TPX as a momentum stock due
to its strong earnings momentum, fundamental growth, brand strength
and new line of moderately priced beds that should appeal to a wide
segment of consumers.
Since that time the stock has risen over 9% and is still gaining
interest from analysts; recently receiving a Buy rating and
upgraded target of $85 by Oppenheimer Analysts. After a 60
percent rise off of its lows in December, the question is whether
Tempur-Pedic still has upside from here or if it's due for a
Tempur-Pedic manufactures, markets and sells high-end beds made
from a material that was originally manufactured to cushion NASA
astronauts on their flights into space.
They operate in about 80 countries and continue to expand, with
their emphasis being here in the US.
In my February 3rd momentum update, I noted the recent release
of TPX's 'Tempur-Simplicity' line, a lower cost line that doubles
the size of their addressable market.
Since then the company held its 2012 Investor Day presentation
on February 22nd, at which time executives offered investors and
analysts quite a bit of information. I wanted to offer some
of the details and highlights on what I was able to glean from the
The global mattress market is a 20 billion dollar a year
industry and growing, with 6 billion in premium sales. The US
represents roughly 6 billion of the total sales (both regular and
premium) alone. Non-spring mattresses (Tempur type) represent
about 30% of that total and are increasing. In fact,
non-spring mattresses have been driving a large part of the growth
in the past 3 years and Tempur is looking to capture that
In the US, Tempur-Pedic beds represent only 3% of the total
marketplace, which means that 97% of the total market share goes to
its competitors, but also implies that TPX has a large amount of
business it can capture.
Tempur's main focus is the US, but they are looking to expand
their international segment over the next several years in addition
to growing presence and sales here in North America. The CEO
offered some very optimistic projections for growth over the next
couple years. He based much of the projections on what he has
delivered over the past 3 years since their last Investor's Day and
what he is experiencing in the market right now.
Back in 2009 the company projected sales of $2 billion with
operating margin to be at 25% by 2014. In 2011 they were well
ahead of those targets, earning $1.4 billion and already seeing
operating margins at more than 24%. During this last call he
upped the ante for TPX, now projecting sales of $3 billion and
$8.00 in EPS by 2016.
At current multiples, that puts the stock just over $150.00…
To get to those numbers, Tempur is rolling out the Simplicity
line, which will fill a void in the mid-range mattress market that
is widely un-developed. The line will offer three different
feeling Tempur mattresses all at a price of $1499 (price per queen
Executives have great confidence in the new line and its
acceptance by the consumer after extensive testing over the past 15
months where 2,500 random mattress buyers tested over 14,000
prototypes before they released the final product. What's
more is that consumers who were tested favored the Tempur line is
all four unique tests over 4 major competitors. Having this
objective data before a major launch should help solidify and
One factor that stood out to me was the emphasis placed on brand
recognition and strength. As I cited in my previous article
and in the subsequent video, TPX is like Apple in that they have a
clear brand identity and are adored by their customers. That
is how they can say they are the 'most recommended mattress in the
TPX stock has had quite a run here. For the longer-term
investor, I wouldn't have too much of an issue getting long based
on the predictions of the executives of the company and the trends
within the sector.
For the shorter term, more active traders and investors, you
might see a pullback in the next couple weeks being that the stock
has basically been straight up over the past 2 months, even
exceeding the S&P 500 by more than 15%. Valuations are
fair given the growth potential, but slightly elevated. I
would look for a pullback into the $71-$74 area, then look to
acquire the shares. Of course, I don't have a crystal
ball and anything could happen, especially in this market
READ THE ORIGINAL ARTICLE
This Week's Momentum Zacks Rank Buy Stocks:
Cedar Fair Entertainment (
In a world of economic uncertainly, political unrest and elevated
stress levels, consumers need a break. In times of strain we
have found that they might turn to alcohol or tobacco. But
based on results from Cedar Fair Entertainment, Americans might be
looking to amusement parks and good ol' fun times to either relieve
pressure or maybe just enjoy the better quality of life and
confidence they are feeling.
With the exception of California, winter is not usually the best
time for outdoor amusement parks. But even in the thick of
cold season, Cedar Fair's park Cedar Point saw record attendance in
2011 that raised per-customer spending and out-of-park revenues 5.2
percent to $1.028 billion for 2011, generating a profit of $72.2
Cedar Fair seems to be doing something right in an industry that
might be seeing a turnaround. Its competitor Six Flags also
reported record earnings in 2011. Could 2012 be the year of
READ FULL STORY
Penske Automotive Group (
Diversity and a strong brand are two integral cogs in the success
machine. Penske has both. What you might not know is
that Penske is the second largest public traded auto retailer in
the US by revenues. They operate about 166 franchises in the
US, about 170 overseas and their automotive division is seeing
I knew them as a truck rental company, but there is much more to
this transportation services business than you might think.
Penske Automotive reported their most profitable year in
company history and offered some bullish commentary going into
fiscal 2012 which might just help propel the stock higher.
READ FULL STORY
Cintas Corporation (
Cintas does more than just rental work uniforms. Over the
years, they have evolved into many diverse segments from document
management to fire protection. Even with this variety, just
about all of their businesses are dependent on a strong consumer
and healthy economy.
Because Cintas has contracts with many large industrial and
commercial companies and runs a diversified corporation, they can
not only weather more storms than their competition, but also offer
customers a gamut of services at a good price to improve
If you are a believer in the American consumer and economic
recovery, then Cintas may be a stock to watch. It has been
building solid momentum over the past several months and recently
reported a blow-out quarter which sent shares soaring.
READ FULL STORY
Post Properties (
The housing numbers yesterday may have looked fairly strong, but
the bulk of the growth seemed to come from multi-family/rental unit
type housing. This is no mistake; rent rates in the US are
near all-time highs and they have been on the rise for a couple
years now after the crash in 2009, as doubtful buyers move into a
flexible, easy rent regimen.
If you live in a major metro area in the US, you might notice
many more condos available to purchase than for rent. Those
rentals are usually carrying big premiums because of less rental
inventory and still unsure homebuyers. Post Properties
manages many mid to high-end communities in different markets
across the US, and is reaping the benefits of the rental boom.
READ FULL STORY
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He
is also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
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