Tempur Sealy (NYSE:TPX) International Inc. (NYSE: TPX) saw a shift in stock rating as a Wedbush analyst moved the mattress company's status from "Outperform" to "Neutral."
The price target remains steady at $52.00. The decision comes amid considerations that the stock's valuation, excluding potential benefits from the acquisition of Mattress Firm (MFRM), appears full.
The analyst noted that Tempur Sealy's current trading at 11 times the next twelve months (NTM) enterprise value to EBITDA (EV/EBITDA) is 14% above its ten-year historical average of 9.7 times and 21% above its five-year average of 9.1 times.
Additionally, the company's stock trades at 18.6 times NTM price to earnings (P/E), which is a 26% and 36% premium to its 10- and 5-year historical averages, respectively.
Tempur Sealy has been recognized for its significant market share gains in recent years, which have provided some insulation from the industry's substantial double-digit declines.
These gains have been a factor in supporting a premium multiple over historical averages. Additionally, the possibility of an accretive acquisition of Mattress Firm has been part of the valuation consideration.
However, the analyst expressed skepticism regarding the likelihood of the Mattress Firm acquisition and projected that Tempur Sealy's share gains are expected to decelerate.
In other recent news, Tempur Sealy International reported a strong performance in the second quarter of 2024. The company's net sales reached approximately $1.2 billion, with an adjusted EBITDA of $231 million, marking a 6% year-over-year improvement.
The adjusted EPS saw a 9% increase to $0.63. This robust performance was largely driven by the company's U.S. business, particularly the Tempur-Pedic brand, which significantly contributed to the sales growth.
Tempur Sealy also announced a full-year adjusted EPS forecast of $2.45 to $2.65, indicating a 6% growth from the previous year. The company anticipates growth in international sales, outperforming the U.S. market, and expects improvements in gross margin and EBITDA margin in the latter half of the year.
Despite the more aggressive promotional environment, the company is gaining market share, especially in the high-end U.S. market. A new supply agreement with a Mattress Firm supplier was also announced, indicating further developments for Tempur Sealy.
InvestingPro Insights
As Tempur Sealy International Inc. (NYSE:TPX) navigates market sentiment and analyst expectations, the latest data from InvestingPro provides a more granular view of the company's financial health and stock performance. The company's market capitalization stands at roughly $8.93 billion, reflecting its scale in the mattress industry. With a Price/Earnings (P/E) ratio of 23.8, slightly higher than the industry average, investors may weigh this against the company's consistent profitability over the last twelve months and the potential for continued growth. Notably, Tempur Sealy has demonstrated a strong return over the last decade, highlighting its long-term performance and market resilience.
InvestingPro Tips suggest that Tempur Sealy has raised its dividend for three consecutive years, which may appeal to income-focused investors. This is coupled with a dividend yield of 1.01%, offering a tangible return to shareholders. Additionally, the company has been profitable over the last twelve months, reinforcing its financial stability. However, it is important to consider that 10 analysts have revised their earnings downwards for the upcoming period, which could signal caution for growth-focused investors.
For those seeking a deeper dive into Tempur Sealy's stock analysis, there are additional InvestingPro Tips available, providing comprehensive insights to inform investment decisions. The InvestingPro platform currently lists more tips that can be accessed for further guidance on the company's performance and outlook.
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