Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 13 Dec, 24 | TPX | Buy | USD 56.71 | USD 61.0 | USD 65.5 | 37 days | 15.5% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Tempur Sealy International, Inc., together with its subsidiaries, designs, manufactures, distributes, and retails bedding products in the United States and internationally. It provides mattresses, foundations and adjustable foundations, and adjustable bases, as well as other products comprising pillows, mattress covers, sheets, cushions, and various other accessories and comfort products under the Tempur-Pedic, Sealy, Stearns & Foster, Sealy, and Cocoon by Sealy brand names. The company sells its products through approximately company-owned stores, online, and call centers; and third party retailers, including third party distribution, hospitality, and healthcare. It also operates a portfolio of retail brands, including Tempur-Pedic retail stores, Sleep Outfitters, Sleep Solutions Outlet, Dreams, and SOVA; and licenses Sealy, Tempur, and Stearns & Foster brands, as well as technology and trademarks to other manufacturers. Tempur Sealy International, Inc. was founded in 1846 and is based in Lexington, Kentucky.
Net Income and EPS Growth: Net income rose by 14.7% year-over-year to $130 million, while diluted EPS increased by 14.1% to $0.73, reflecting strong profitability improvements.
International Sales Growth: The International segment demonstrated robust performance, with net sales increasing by 12.4% to $284.7 million compared to $253.4 million in Q3 2023. On a constant currency basis, the increase was 10.5%.
Adjusted Gross Margin Decline in North America: Adjusted gross margin in the North America segment decreased slightly by 10 basis points, from 43.2% in Q3 2023 to 43.1%, driven by changes in business mix.
North America Sales Decline: The North America segment saw a 0.8% decline in net sales, falling from $1.023 billion in Q3 2023 to $1.015 billion, primarily due to macroeconomic pressures affecting consumer behavior.
Key investment risks for Tempur Sealy include macroeconomic pressures affecting consumer spending in North America, vulnerability to currency fluctuations impacting international revenues, rising competition in the global bedding market, and high debt levels that may constrain financial flexibility.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 56.71 | 49.7 | 61.0 | 65.5 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Strong Sales and Margins
Tempur Sealy International, Inc. reported consolidated sales growth of 1.8% in Q3 2024, with total net sales reaching $1.3 billion, up from $1.277 billion in Q3 2023. The International business segment drove the growth with a 12.4% increase in net sales, offsetting a slight 0.8% decline in the North America segment. On a constant currency basis, total net sales rose 1.7%. The Company also improved its gross margin to 45.4% from 44.9%, with an adjusted gross margin of 46.2%, reflecting efficiency gains and favorable commodity costs.
Earnings and Profitability
Net income rose 14.7% year-over-year to $130 million, while adjusted net income grew by 7.1% to $146.5 million. Earnings per diluted share (EPS) increased 14.1% to $0.73, and adjusted EPS grew 6.5% to $0.82. Operating income also demonstrated significant growth, up 10.2% to $201.8 million, with adjusted operating income increasing by 4.2% to $223.7 million. These results underscore Tempur Sealy's focus on operational efficiency and a diversified business model.
Performance by Business Segment
The North America segment experienced a modest decline in net sales, driven by continued macroeconomic pressures affecting U.S. consumer behavior. Gross margin remained stable at 42%, while adjusted gross margin slightly decreased due to a mix shift and new OEM business distribution. International performance, however, was robust, with a 12.4% rise in net sales, bolstered by successful product launches and operational efficiencies. International gross margin improved to 57.3%, and operating margin increased by 200 basis points to 18.2%.
Corporate Expense Management
Corporate operating expenses declined to $43.2 million from $52.3 million in the prior year. Adjusted operating expenses were $32 million, down from $34.2 million, largely due to reduced variable compensation expenses. This reduction contributed to the Company's overall profitability improvements, highlighting its disciplined approach to cost management.
Financial Position and Leverage
Tempur Sealy reduced its leverage ratio to 2.41 times consolidated indebtedness less netted cash, compared to 2.89 times in the prior year. The Company ended the quarter with total debt of $2.3 billion and net indebtedness of $2.2 billion, reflecting a strong focus on maintaining a healthy financial position.
Revised Guidance and Dividend Announcement
For 2024, the Company narrowed its adjusted EPS guidance to a range of $2.45 to $2.55, implying a 4% year-over-year increase at the midpoint. The forecast considers slightly lower sales compared to 2023. Tempur Sealy’s Board declared a quarterly cash dividend of $0.13 per share, payable on December 5, 2024, to shareholders of record as of November 21, 2024, reaffirming its commitment to returning value to shareholders.
Considering growing revenues, healthy guidance, recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on the Tempur Sealy International, Inc. (NYSE: TPX) at the closing price of USD 56.71, as on December 12, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Cyclical Industry: Furnishings, Fixtures & Appliances
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| TPX Tempur Sealy International Inc |
0.34 0.50% | 68.78 | 27.21 | 20.04 | 2.12 | 18.33 | 2.70 | 16.85 |
| HRSHF Haier Smart Home Co. Ltd |
-0.2275 6.60% | 3.22 | 10.36 | 8.90 | 0.10 | 1.68 | 0.08 | 1.00 |
| HSHCY Haier Smart Home Co. Ltd |
-0.13 1.01% | 12.68 | 10.92 | 9.25 | 0.10 | 1.74 | 0.09 | 1.04 |
| QIHCF Haier Smart Home Co. Ltd |
- -% | 1.59 | 3.77 | 3.10 | 0.10 | 0.58 | 0.02 | 0.27 |
| NCLTY Nitori Holdings Co. Ltd |
-0.19 1.94% | 9.58 | 23.73 | 19.38 | 0.02 | 2.36 | 0.02 | 0.11 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 12, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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