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Sleep Number Corporation (SNBR - Free Report) is a domestic provider of sleep solutions and related services. SNBR designs, manufactures, and retails beds, sheets, pillows and other products under the Sleep Number and Sleep Number 360 brands. The company sells its products directly to consumers through retail, online, phone, and chat as well as through its e-commerce platform. SNBR operates nearly 650 retail stores in 50 U.S. states. Sleep Number Corporation was founded in 1987 and is based in Minneapolis, MN.
The Zacks Rundown
Formerly known as Select Comfort Corporation, SNBR has been severely underperforming the market over the past year. A Zacks Rank #5 (Strong Sell) stock, SNBR experienced a climax top in March of last year and has been in a price downtrend ever since. The stock is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues its volatile start to the year.
Sleep Number is part of the Zacks Furniture industry group, which currently ranks in the bottom 26% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Candidates in the bottom half of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies.
Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts
Earnings misses have been a sore spot for SNBR during the past year. The sleep solution provider has fallen short of estimates in three of the past four quarters. SNBR most recently reported Q1 EPS last week of $0.09, missing the $0.33 consensus estimate by -72.73%. Revenues of $527.13 million also missed the mark by -1.92%. Last year, Sleep Number reported earnings in the first quarter of $2.51/share on revenues of $568.26 million. These are the types of negative trends that the bears like to see.
SNBR has posted an average earnings miss of -27.48% over the past four quarters. Analysts have been revising earning estimates downward as of late. For the current quarter, estimates have been slashed -5.62% over the past 60 days. The Q2 Zacks Consensus EPS Estimate now stands at $0.84, translating to a -4.55% earnings regression relative to the same quarter last year.
For the year, analysts have also reduced their EPS estimate by -31.78% in the past 60 days. The 2022 Zacks Consensus EPS Estimate is now $5.11, reflecting a -17.05% decline compared to last year.
Technical Outlook
SNBR stock has been steadily falling since last year and has now established a well-defined downtrend. Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping down. Shares have declined more than 60% in the past year. The stock continues to trade below both averages, while the 50-day moving average has acted as steady resistance throughout the down move:
Image Source: StockCharts
Sleep Number has continued its descent into the new year, with shares falling over 40% and showing no signs of a reversal.
Final Thoughts
The recent earnings misses in addition to deteriorating estimates are both huge red flags and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
SNBR’s characteristics have resulted in a Zacks Momentum Style Score of ‘C’, indicating further downside is likely. The fact that SNBR is included in a bottom-performing industry group simply adds to the growing list of concerns. Investors will want to steer clear of SNBR until the situation shows major signs of improvement, or possibly include it as part of a hedge or short strategy.
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Bear of the Day: Sleep Number Corp. (SNBR)
Sleep Number Corporation (SNBR - Free Report) is a domestic provider of sleep solutions and related services. SNBR designs, manufactures, and retails beds, sheets, pillows and other products under the Sleep Number and Sleep Number 360 brands. The company sells its products directly to consumers through retail, online, phone, and chat as well as through its e-commerce platform. SNBR operates nearly 650 retail stores in 50 U.S. states. Sleep Number Corporation was founded in 1987 and is based in Minneapolis, MN.
The Zacks Rundown
Formerly known as Select Comfort Corporation, SNBR has been severely underperforming the market over the past year. A Zacks Rank #5 (Strong Sell) stock, SNBR experienced a climax top in March of last year and has been in a price downtrend ever since. The stock is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues its volatile start to the year.
Sleep Number is part of the Zacks Furniture industry group, which currently ranks in the bottom 26% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months. Candidates in the bottom half of industry groups can often represent solid potential short candidates. While individual stocks have the ability to outperform even when included in poor-performing industries, their industry association serves as a headwind for any potential rallies.
Weak Foundation: Falling Short on Earnings and Deteriorating Forecasts
Earnings misses have been a sore spot for SNBR during the past year. The sleep solution provider has fallen short of estimates in three of the past four quarters. SNBR most recently reported Q1 EPS last week of $0.09, missing the $0.33 consensus estimate by -72.73%. Revenues of $527.13 million also missed the mark by -1.92%. Last year, Sleep Number reported earnings in the first quarter of $2.51/share on revenues of $568.26 million. These are the types of negative trends that the bears like to see.
SNBR has posted an average earnings miss of -27.48% over the past four quarters. Analysts have been revising earning estimates downward as of late. For the current quarter, estimates have been slashed -5.62% over the past 60 days. The Q2 Zacks Consensus EPS Estimate now stands at $0.84, translating to a -4.55% earnings regression relative to the same quarter last year.
For the year, analysts have also reduced their EPS estimate by -31.78% in the past 60 days. The 2022 Zacks Consensus EPS Estimate is now $5.11, reflecting a -17.05% decline compared to last year.
Technical Outlook
SNBR stock has been steadily falling since last year and has now established a well-defined downtrend. Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping down. Shares have declined more than 60% in the past year. The stock continues to trade below both averages, while the 50-day moving average has acted as steady resistance throughout the down move:
Image Source: StockCharts
Sleep Number has continued its descent into the new year, with shares falling over 40% and showing no signs of a reversal.
Final Thoughts
The recent earnings misses in addition to deteriorating estimates are both huge red flags and need to be respected. These will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
SNBR’s characteristics have resulted in a Zacks Momentum Style Score of ‘C’, indicating further downside is likely. The fact that SNBR is included in a bottom-performing industry group simply adds to the growing list of concerns. Investors will want to steer clear of SNBR until the situation shows major signs of improvement, or possibly include it as part of a hedge or short strategy.