< !DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.01//EN" "http://www.w3.org/TR/html4/strict.dtd">
Tempur-Pedic
International (TPX)
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 nap?
Recent
Developments
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 report.
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 business.
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 set).
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 justify projections.
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 US.’
Moving
Forward
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 climate. READ
THE
ORIGINAL ARTICLE
This
Week’s
Momentum Zacks Rank Buy Stocks:
Cedar
Fair
Entertainment (FUN)
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 million.
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 the
fun-park? READ
FULL
STORY
Penske
Automotive
Group (PAG)
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 favorable trends.
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 (CTAS)
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 retention.
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 (PPS)
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.
Be the first to comment