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Leggett & Platt, Incorporated (LEG - Analyst Report), the manufacturer of diversified engineered products and components, remains on our Neutral list as it continues to post robust bottom line performance and provided an impressive fiscal 2013 forecast. Its strategy to optimize capital allocation and increased focus on core businesses are also noteworthy. However, we remain concerned regarding the increasing material costs, intense competition and exposure to adverse foreign currency translations.

Why Reiterate?

Leggett reported earnings of 32 cents per share for the fourth quarter 2012, which surged 45% from the comparable year-ago quarter and also swept past the Zacks Consensus Estimate of 29 cents. The year-over-year increase was mainly driven by a sturdy operational performance that comprised superior volume and margin growth, better cost management and the acquisition of Western Pneumatic Tube. The average positive surprise in the trailing four quarters comes to 7.71%.

Buoyed by strong quarterly results, management expects full-year 2013 earnings per share to be between $1.50 and $1.75, representing a significant rise from earnings per share of $1.46 reported in 2012. Currently, the Zacks Consensus Estimate for 2013 stands at $1.62 per share. Net sales are anticipated in the range of $3.75–$3.95 billion, reflecting growth of 1%–6%.

Further, we believe that Leggett has a well-diversified customer base and solid research and development (R&D) capabilities, offering a competitive edge while strengthening its pricing power in the market. Moreover, in order to enhance the core business operations and improve financial flexibility, Leggett is continuously taking strategic actions to add new products to its portfolio as per the consumers’ changing preferences while simultaneously divesting low-performing businesses.

On the flip side, the company operates in a competitive environment and strives to maintain its market share, actively competing with numerous manufacturers and distributors of consumer and commercial products. The company’s primary traits to compete in the environment include focus on pricing, big consumer brands, introduction of new products, and customer service.

While our recommendation on Leggett is based on various positives mentioned above, soft economic recovery, threats of competition and foreign currency translation keep us on the sidelines. The company carries a Zacks Rank #3 (Hold).

Other Stocks Worth Considering

Other stocks worth considering in the home furnishing-appliances industry are Sealy Corporation , Whirlpool Corporation (WHR - Analyst Report) and Virco Mfg. Corporation (VIRC). All these companies hold a Zacks Rank #1 (Strong Buy).

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