Leggett & Platt Inc.
) - the manufacturer of diversified engineered products and
components - reported fourth-quarter 2012 earnings per share of
32 cents that rose sharply by 45% year over year. Quarterly
earnings of this Zacks Rank #3 (Hold) stock also swept past the
Zacks Consensus Estimate of 29 cents.
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For the full year, Leggett posted record earnings per share of
$1.46, up 22% from 2011 level. However, earnings missed the Zacks
Consensus Estimate of $1.49. The year-over-year increase was
mainly driven by a sturdy operational performance that comprised
superior volume and margin growth, better cost management and the
acquisition of Western Pneumatic Tube.
Total sales during the quarter fell marginally to $853.0 million
compared with $854.1 million in the year-ago quarter, while it
missed the Zacks Consensus Estimate of $873 million. During the
quarter, sales were impacted by 2% decline in same location sales
and a fall in rod mill trade sales, partially offset by 1%
increase in unit volume and 2% jump in acquisitions.
Net sales for the full year grew 2% year over year to $3,720.8
million, but missed the Zacks Consensus Estimate of $3,740
million. For the year, volume grew 3%, while acquisitions made
for 1% of net sales. However, sales results were offset by lower
sales from rod mill trade and currency translation effects.
Gross profit for the quarter surged 23.8% to $177.0 million,
while gross margin expanded 410 basis points to 20.8%, mainly due
to lower cost of goods sold.
Operating income increased substantially to $75.6 million from
$12.9 million in the year-ago quarter, benefiting from higher
unit volumes, diminished raw material costs in certain businesses
and the acquisition of Western Pneumatic Tube. Simultaneously,
operating margin also improved 740 basis points to 8.9%.
revenues climbed 4.2% to $454.8 million, benefiting mainly from
unit volume growth. Operating income increased 66% year over year
to $34.4 million, on the back of increased sales and absence of
restructuring costs that occurred in the year-ago quarter.
Commercial Fixturing & Components
moved down 7.2% to $90.8 million resulting from the divestiture.
On the other hand, operating income recorded a whopping increase
to $0.9 million compared with an operating loss of $6.7 million
in the prior-year quarter, driven by higher cost improvement
benefits and absence of last year's restructuring costs.
Fourth quarter sales of the
segment witnessed a 5.8% decline to $189.1 million impacted by
lower trade sales from the steel mill, offset by revenues from
acquisitions. Operating income escalated substantially to $15.8
million versus a loss of $10.9 million reported in the year-ago
quarter, on the back of lower costs, absence of last year's
restructuring related costs and improved earnings from
segment's sales inched up 0.6% to $188.3 million. Operating
income grew 16% to $19.6 million, mainly due to absence of last
year's restructuring related costs.
Other Financial Details
Leggett had a solid financial base at the end of 2012 with cash
and equivalents of $359.1 million, long-term debt of $853.9
million, and shareholders' equity of $1,442.2 million. The
company's net debt to net capital ratio as of Dec 31, 2012 was
The cash generated from operations increased 64% to $208.7
million in the fourth quarter, with net cash from operations
increasing 37% to $449.7 million for the year.
Simultaneously, the company has an impressive dividend policy
alongside a regular share repurchase program, focused on
returning better value to the shareholders. During the year, the
company declared 4 quarterly dividends, but paid 5 of them. This
was due to the advance payment of the Jan 2013 dividend in Dec
2012. In doing so, the company paid $200 million of its cash for
dividend payments in 2012.
Further enhancing investor returns, the company bought back
nearly 2.0 million shares in 2012 and issued 4.7 million shares,
of which two-thirds related to employee stock options exercises.
Leggett forecasted full-year 2013 earnings per share between
$1.50 and $1.75, representing a significant rise from earnings
per share of $1.46 reported in 2012. Net sales are anticipated in
the range of $3.75-$3.95 billion, reflecting growth of 1% to 6%.
Further, continuing its trend of generating cash in excess of the
amount required to fund dividends and capital expenditures, the
company predicted operating cash flows of over $350 million.
Capital expenditures for the year are expected to be about $100
million, while the company anticipates paying $125 million toward
Going into 2013, the company plans to return to its normal
dividend payment trend of 4 dividends a year. As a result, the
company expects to announce 4 dividends but pay only 3 of them,
with the fourth dividend being payable in Jan 2014. Further, the
company expects to continue its share repurchase program, having
a standing authorization to buy back up to 10 million shares
every year. Moreover, the company expects to issue about 3
million shares through employee benefit schemes in 2013.
Other Stocks to Consider
Apart from Leggett, furnishing peers that are performing well
Virco Mfg. Corporation
), both of which have a Zacks Rank #1 (Strong Buy) and
Hooker Furniture Corp.
), which carries a Zacks Rank #2 (Buy).