Leggett (LEG) Q2 Earnings Top, Sales Miss on Lower Volumes
Leggett & Platt, Incorporated LEG reported mixed second-quarter 2020 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
Following the earnings release, the company’s shares dropped more than 3% in the after-hours trading session on Aug 3. It witnessed lower sales and earnings in the quarter, largely due to the economic impact of the COVID-19 pandemic. Also, the company did not provide any guidance for 2020 due to coronavirus-led macroeconomic uncertainty.
Quarter in Details
Leggett reported adjusted earnings of 16 cents per share, which beat the Zacks Consensus Estimate of 8 cents by 100%. However, the figure declined 75% from the year-ago period due to lower EBIT.
Total sales were $845 million, which missed the consensus mark of $914 million by 7.5% and decreased 30% from the prior-year level. The downside was mainly due to a 31% decline in organic sales given 29% lower volume. Also, raw material-related selling price decreases and negative currency impacted sales by 2%. Meanwhile, acquisitions contributed 1% to sales growth.
Adjusted EBIT fell 62% from the prior-year period to $51 million, partially offset by lower fixed costs. Adjusted EBIT margin also contracted 520 basis points (bps) to 6%. Adjusted EBITDA margin also contracted 380 bps year over year to 11.5%.
Leggett Platt, Incorporated Price, Consensus and EPS Surprise
Net trade sales in Bedding Products decreased 28% from the year-ago level to $410.6 million due to 25% lower volume. Raw material-related price decreases and currency impact reduced sales by 3% due to COVID-related disruptions, and exited volume in Fashion Bed and Drawn Wire.
Adjusted EBIT margin contracted 570 bps to 5.2%. Adjusted EBITDA margin also fell 430 bps year over year.
The Specialized Products segment's trade sales declined 47% from the prior-year figure to $140.8 million. The downside was due to a 46% year-over-year decline in volumes, thanks to the COVID-19 outbreak. Negative currency further impacted sales by 1%. Adjusted EBIT margin decreased 1,150 bps to 4%. EBITDA margin also contracted 780 bps from the prior year.
Trade sales in the Furniture, Flooring & Textile Products segment declined 22% from the prior-year level to $293.7 million, mainly due to 25% lower organic sales due to 24% volume decline. Raw material-related selling price decreases and currency impact reduced sales by 1%. Adjusted EBIT margin of 8.1% was down 60 bps from the prior year. Adjusted EBITDA margin also fell 30 bps year over year to 10.2%.
As of Jun 30, 2020, the company had $1.3 billion of liquidity, $209 million cash on hand and $1.1 billion available under the revolving credit facility.
Long-term debt at June-end was $2.1 billion, down from $2.4 billion reported in the first quarter. There are no significant maturities until August 2022. Cash flow from operations was $112 million, down $60 million from a year ago.
It expects capital expenditure to be $60 million for 2020.
Leggett — which shares space with Masonite International Corporation DOOR, American Woodmark Corporation AMWD and WillScot Corporation WSC in the Zacks Furniture industry — currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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