On Thursday, Truist Securities revised its price target for shares of Leggett and Platt (NYSE: LEG), a diversified manufacturing company, from $13.00 to $11.00, while maintaining a Hold rating on the stock. The adjustment follows a significant drop in the company's share price this year, which has declined by 60%, in stark contrast to the S&P 500's 15% gain over the same period.
The reduction in the price target is attributed to Leggett and Platt's weaker-than-expected earnings and the substantial reduction of its once sizeable dividend. The company's operational challenges have been compounded by a historic downturn in mattress sales, which has had a ripple effect across the business, particularly within its ECS foam division.
The analyst from Truist Securities pointed out that several of the company's units are either marginally profitable or operating at a loss. With the return of Karl Glassman as CEO, the firm's immediate priority is believed to be the improvement or potential divestiture of these struggling segments.
The change in the shareholder demographic from those focused on dividend returns to others has also introduced additional volatility into Leggett and Platt's stock. While the Hold rating remains in place, Truist Securities has expressed that a more definitive recovery strategy from the company is needed before any rating upgrades can be considered. Despite the challenges, the analyst noted that not all aspects of Leggett and Platt's business are performing poorly.
In other recent news, Leggett & Platt has seen significant changes and developments.
The company announced Karl Glassman as the new President and CEO, succeeding Mitch Dolloff. Glassman, a veteran at Leggett & Platt, will continue to serve as Board Chairman and is committed to steering the company toward improved profitability and shareholder value. This leadership change comes with the company's confidence in Glassman's deep understanding of its markets and operations.
In the financial sphere, Leggett & Platt reported a challenging first quarter in 2024, with a 10% decrease in sales compared to the same period in 2023. The earnings per share also declined due to various factors, and the company reduced the quarterly dividend to $0.05 per share. Despite these challenges, full-year sales are forecasted to be between $4.35 billion and $4.65 billion, and full-year EPS is expected to be $0.95 to $1.25.
The company expects to generate $300 million to $350 million in cash from operations for the year and is actively pursuing opportunities in higher-value products.
InvestingPro Insights
In light of Truist Securities' revised price target for Leggett and Platt, real-time data from InvestingPro offers additional context for investors considering the stock. Currently, Leggett and Platt has a market capitalization of $1.44 billion, reflecting the significant impact of the share price decline. The company's P/E ratio stands at -9.31, indicating that it has been unprofitable over the last twelve months as of Q1 2024. However, the adjusted P/E ratio for the same period suggests a turnaround with a value of 9.34, which could signal a shift towards profitability.
Despite recent challenges, Leggett and Platt's commitment to shareholder returns is evident, with the company having raised its dividend for 53 consecutive years. This is underscored by a shareholder yield that is considered high, as per InvestingPro Tips. Moreover, the company's liquid assets exceed its short-term obligations, which may provide some financial stability in uncertain times. Nevertheless, analysts have revised their earnings downwards for the upcoming period, and the company has been trading near its 52-week low, indicating potential concerns about near-term performance.
For investors seeking a deeper analysis, InvestingPro offers additional tips on Leggett and Platt, which can be found at https://www.investing.com/pro/LEG. These tips could provide further insights into the company's financial health and future prospects. Additionally, interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable investment information.
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