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Leggett (LEG) to Report Q3 Earnings: What's in the Cards?

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Leggett & Platt, Incorporated (LEG - Free Report) is slated to release third-quarter 2020 results on Nov 2, after market close.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 100% but revenues missed the same by 7.5%. On a year-over-year basis, earnings and revenues declined 75% and 30%, respectively.

Leggett’s earnings topped the consensus mark in all the last four quarters, with the average being 29.7%.

However, the company has a dismal sales surprise history. It missed the consensus mark for sales in 10 of the last 13 quarters owing to lower deliveries across the business.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased to 70 cents per share from 67 cents over the past 60 days. The said figure indicates a 7.9% decrease from the year-ago earnings of 76 cents per share. Also, the consensus mark for revenues is $1.27 billion, suggesting 2.3% year-over-year growth.

Factors to Note

The company is expected to have registered lower earnings, given tepid sales growth in the third quarter. Although it is expected to have registered higher demand for Bedding, Home Furniture and Flooring, the Automotive business may have remained challenged. That said, Automotive is expected to have improved sequentially.

Again, although demand trends have been improving, higher input costs may have put some pressure on margins. Precisely, lag between input cost increase and price rise can create pressure on gross margin.

Meanwhile, Leggett has been suffering from lower volumes, reduced raw material-related selling price and currency headwinds over the last few quarters.

Its exit from Fashion Bed and Drawn Wire, along with decline in demand in U.S. Spring, Automotive and Hydraulic Cylinders, Work Furniture and Home Furniture businesses will likely reflect on the company’s third-quarter results.

That said, its focus on the strategic plan — which comprises divesture of low-performing businesses, and improvement in margins and returns — is commendable. The positive impacts of these initiatives are expected to have somewhat offset the headwinds in to-be-reported quarter.

The consensus estimate for Bedding Products’ net sales is pegged at $633 million, indicating an improvement from $411 million in the second quarter.

For, Specialized Products, the consensus estimate for the segment’s net sales is pegged at $235 million, indicating an improvement of 66.7% sequentially.

The consensus estimate for Furniture, Flooring & Textile Products segment’s net sales is pegged at $391 million, indicating an improvement of 33% sequentially.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Leggett this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Leggett currently carries a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some stocks from the Zacks Consumer Discretionary space that investors may consider, as our model shows that these have the right combination of elements to deliver an earnings beat this time around.

Electronic Arts Inc. (EA - Free Report) has an Earnings ESP of +211.11% and a Zacks Rank #3, at present.

Choice Hotels International, Inc. (CHH - Free Report) has an Earnings ESP of +6.19% and a Zacks Rank of 3.

Callaway Golf Company (ELY - Free Report) has an Earnings ESP of +12.56% and a Zacks Rank #3.

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