Leggett & Platt Inc. (LEG) has been gaining momentum since the company reported better-than-expected third-quarter 2014 bottom-line results and raised its 2014 earnings guidance on Oct 22. Yesterday, the shares of this home furnishing retailer reached a new high of $41.53 before closing trade at $41.30. Notably, the company has amassed a return of 16.7% since it released the third-quarter results and over 34% year-to-date.
The company posted strong results in third-quarter 2014, backed by enhanced sales coupled with a lower tax rate and share count. In the quarter, the company demonstrated a significant progress in its efforts to boost sales, recording 14% year-over-year growth. Moreover, it was the company’s third consecutive quarter of gradual improvement in rate of sales growth driven by robust development in majority of its businesses.
This improvement in top-line performance along with a lowered share count has carried down the income statement resulting in an expansion in margins and consistent growth in earnings per share. We also remain optimistic about the company’s future performance given a positive outlook for fiscal 2014 and upward estimate revisions.
We commend Leggett’s consistent endeavors to keep itself on the growth trajectory through acquisitions that would augment its top-line performance over the long term. In order to enhance core business operations and improve financial flexibility, Leggett is consistently taking strategic actions to add new products to its portfolio as per the changing preferences of consumers, while simultaneously divesting low-performing businesses.
Some of the steps taken by Leggett during the last year to enhance its business portfolio include the acquisition of three U.S. innerspring component production facilities of Tempur Sealy, investment in machinery to support the significant growth seen in Comfort Core innersprings, expansion in China to sustain rapid growth of its automotive business and a small acquisition of a German designer of motion furniture hardware in the third quarter. On the other hand, the company is in the process of divesting its Store Fixtures business, which has not been performing up to the mark.
We are also impressed with this Zacks Rank #2 (Buy) company’s strong financial base that enables it to make profitable ventures and return value to shareholders. The company’s net-debt-to-capital ratio stands at 34.8%, close to the mid-point of the company's long-term targeted range of 30%—40%. Furthermore, the company is rationalizing its capital expenditures, including store-remerchandising efforts, to improve its return on investment. As a result, the company hopes to generate substantial future cash flows.
Apart from Leggett, L Brands Inc. (LB), V.F. Corp. (VFC) and Whirlpool Corp. (WHR) also hit 52-week highs of $76.89, $70.86 and $177.18, respectively, on Nov 11.
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