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Leggett & Platt, Inc. (LEG)

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Leggett & Platt, Inc.'s (LEG) increased operating expenses coupled with higher cost inflation battered the third-quarter 2011 results. The company reported a flat year-over-year earnings of $0.31 per share, missing the Zacks Consensus Estimate of $0.36. Consequently, anticipating lower market growth expectation, the company has lowered its sales guidance for fiscal 2011 from the range of $3.5 $3.7 billion to $3.6 billion.

On the back of promising sales, Leggett also lowered and narrowed its forecasted 2011 EPS in the range of $1.15-$1.20 per share from $1.25-$1.40 per share. Moreover, intense competition from global and regional players, volatility in raw material prices and exposure to adverse foreign currency translations may undermine the company's growth prospects and profitability.

Our long-term Underperform recommendation on the stock indicates that it would perform below the broader market. Our target price of $20.00, 16.8x 2011 EPS, reflects this view.

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