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Analyst Blog

Leggett & Platt, Inc. (LEG - Analyst Report), the manufacturer of diverse engineered products and components, remains on our Neutral list with a price target of $35.00 per share.

Why Reiterate?

A well-diversified customer base, pricing power and solid research and development (R&D) capabilities, facilitates Leggett & Platt to float in the soft economic environment. In order to focus more on its core business operations and improve financial flexibility, the company is continuously taking strategic actions to add new products to its portfolio as per the consumers’ changing preferences while simultaneously divesting low-performing businesses.

We also remained impressed by Leggett’s bottom line performance in the recent concluded quarter. The company posted earnings of 33 cents per share, which surged 10% from the comparable year-ago quarter, mainly driven by a sturdy operational performance comprising effective cost management, better product mix in some businesses and the acquisition of Western Pneumatic Tube.

Buoyed by strong bottom-line results, management raised the lower end of its sales growth and earnings guidance for full-year 2013. The company now expects sales to rise in the range of 2–6% and earnings to come at $1.55–1.75 per share. Earlier, Leggett projected sales growth of 1–6% and earnings per share in the range of $1.50–1.75. Currently, the Zacks Consensus Estimate for 2013 stands at $1.61 per share.

On the flip side, we remain concerned about increasing material costs, intense competition and exposure to adverse foreign currency translations. 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.

Given the pros and cons inhibited in the stock we prefer to remain on the sidelines, and maintain our Neutral recommendation. This is also well supported by the company’s current Zacks Rank #3 (Hold).

Other Stocks Worth Considering

Better performing stocks in the home furnishing appliances industry are Hooker Furniture Corp. (HOFT - Snapshot Report), Mohawk Industries Inc. (MHK - Snapshot Report) and Virco Mfg. Corporation (VIRC). Hooker and Mohawk have a Zacks Rank #1 (Strong Buy) while Virco carries a Zacks Rank #2 (Buy).

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