It has been about a month since the last earnings report for Legget & Platt (LEG - Free Report) . Shares have added about 11.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Legget & Platt due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Leggett Q2 Earnings Top, Sales Miss on Lower Volumes
Leggett & Platt, Incorporated reported mixed second-quarter 2020 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
It witnessed lower sales and earnings in the quarter, largely due to the economic impact of the COVID-19 pandemic. Also, the company did not provide any guidance for 2020 due to coronavirus-led macroeconomic uncertainty.
Quarter in Details
Leggett reported adjusted earnings of 16 cents per share, which beat the Zacks Consensus Estimate of 8 cents by 100%. However, the figure declined 75% from the year-ago period due to lower EBIT.
Total sales were $845 million, which missed the consensus mark of $914 million by 7.5% and decreased 30% from the prior-year level. The downside was mainly due to a 31% decline in organic sales given 29% lower volume. Also, raw material-related selling price decreases and negative currency impacted sales by 2%. Meanwhile, acquisitions contributed 1% to sales growth.
Adjusted EBIT fell 62% from the prior-year period to $51 million, partially offset by lower fixed costs. Adjusted EBIT margin also contracted 520 basis points (bps) to 6%. Adjusted EBITDA margin also contracted 380 bps year over year to 11.5%.
Net trade sales in Bedding Products decreased 28% from the year-ago level to $410.6 million due to 25% lower volume. Raw material-related price decreases and currency impact reduced sales by 3% due to COVID-related disruptions, and exited volume in Fashion Bed and Drawn Wire.
Adjusted EBIT margin contracted 570 bps to 5.2%. Adjusted EBITDA margin also fell 430 bps year over year.
The Specialized Products segment's trade sales declined 47% from the prior-year figure to $140.8 million. The downside was due to a 46% year-over-year decline in volumes, thanks to the COVID-19 outbreak. Negative currency further impacted sales by 1%. Adjusted EBIT margin decreased 1,150 bps to 4%. EBITDA margin also contracted 780 bps from the prior year.
Trade sales in the Furniture, Flooring & Textile Products segment declined 22% from the prior-year level to $293.7 million, mainly due to 25% lower organic sales due to 24% volume decline. Raw material-related selling price decreases and currency impact reduced sales by 1%. Adjusted EBIT margin of 8.1% was down 60 bps from the prior year. Adjusted EBITDA margin also fell 30 bps year over year to 10.2%.
As of Jun 30, 2020, the company had $1.3 billion of liquidity, $209 million cash on hand and $1.1 billion available under the revolving credit facility.
Long-term debt at June-end was $2.1 billion, down from $2.4 billion reported in the first quarter. There are no significant maturities until August 2022. Cash flow from operations was $112 million, down $60 million from a year ago.
It expects capital expenditure to be $60 million for 2020.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 35.13% due to these changes.
At this time, Legget & Platt has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Legget & Platt has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.