Factors Setting the Tone for Leggett's (LEG) Earnings in Q3

Shutterstock photo

Leggett & Platt, IncorporatedLEG is scheduled to release third-quarter 2018 results on Oct 25. In the last reported quarter, the company's earnings surpassed the Zacks Consensus Estimate by a margin of 3.3%.

How are Estimates Faring?

Let's look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company prior to the release. For the quarter under review, the Zacks Consensus Estimate is pegged at 72 cents, flat over the past 30 days. This reflects a gain of 18% from 61 cents in the year-ago quarter. Revenues are expected to be $1,102 million, up more than 9% year over year.

Factors at Play

Leggett's third-quarter 2018 results are likely to be driven by an increase in raw material price and currency alongside volume growth. Also, the company has been experiencing higher sales, as evident from its 9.3% year-over-year net sales growth in the first six months of 2018.

Moreover, the company's long-term strategic plan bode well. Leggett has successfully completed the first two parts of its strategic plan. While the first part was to divest low-performing businesses, the second part comprised an improvement in margins and returns. Currently, it is working on the third part of the plan that aims at achieving top-line growth of 4-5% annually. Further, solid market demand coupled with market share gains has been enhancing capacity utilization over the years.

Furthermore, acquisitions contributed around 3% and 2% to sales in the second and first quarter of 2018, respectively. Notably, the company's 2018 sales view was backed by expectation of mid-single-digit volume growth, raw material price increases and favorable currency. The PHC acquisition is likely to contribute 2% to sales growth as well.

However, margin in the quarter will continue to be hurt by commodity and steel cost inflation. In second-quarter 2018, margin contracted 230 basis points (bps) to 21%.

Leggett & Platt, Incorporated Price and Consensus

Leggett & Platt, Incorporated Price and Consensus | Leggett & Platt, Incorporated Quote

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Leggett has an Earnings ESP of +1.04% and a Zacks Rank #3, a combination that suggests that the company is likely to beat estimates this quarter. 

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these also have the right combination of elements to post earnings beat:

KBR, Inc. KBR has an Earnings ESP of +0.65% and a Zacks Rank #3.  You can see the complete list of today's Zacks #1 Rank stocks here .

M.D.C. Holdings, Inc. MDC has an Earnings ESP of +4.28% and a Zacks Rank #3.

Dycom Industries, Inc. DY has an Earnings ESP of +3.53% and a Zacks Rank #3.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.

See This Ticker Free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Dycom Industries, Inc. (DY): Free Stock Analysis Report

M.D.C. Holdings, Inc. (MDC): Free Stock Analysis Report

KBR, Inc. (KBR): Free Stock Analysis Report

Leggett & Platt, Incorporated (LEG): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DY , MDC , KBR , LEG

More from Zacks.com




Equity Research

Research Brokers before you trade

Want to trade FX?