A month has gone by since the last earnings report for Legget & Platt (
LEG Quick Quote LEG - Free Report) . Shares have added about 3.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Leggett ( LEG Quick Quote LEG - Free Report) Q3 Earnings Top, Sales Miss on Lower Volumes
Leggett & Platt, Incorporated reported mixed third-quarter 2020 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
Meanwhile, it did not provide any guidance, given persistent macroeconomic uncertainty related to the effects of the COVID-19 pandemic. Quarter in Details
Leggett reported adjusted earnings of 80 cents per share, which beat the Zacks Consensus Estimate of 70 cents by 14.3%. Also, the figure grew 5.3% from the year-ago period due to higher EBIT.
Total sales were $1,207.6 million, which missed the consensus mark by 4.8% and decreased 3% from the prior-year level. The downside was mainly due to a 3% decline in organic sales, given 3% lower volume. Also, raw material-related selling price decreases were offset by benefits from currency. Higher demand from the residential end market was more than offset by weakness in Aerospace and Work Furniture. Adjusted EBIT margin expanded 80 basis points (bps) to 12.7%, benefiting from fixed cost reductions. Adjusted EBITDA margin also expanded 80 bps year over year to 16.6%. Segment Details
Net trade sales in
Bedding Products decreased 2% from the year-ago level to $589.8 million as higher demand in ECS and U.S. and European Spring was more than offset by lower volume in Adjustable Bed, along with exited volume in Drawn Wire. Organic sales were down 1% from the prior-year quarter due to lower volume. Adjusted EBIT margin increased 70 bps to 12.5%. Adjusted EBITDA margin also grew 30 bps year over year. The Specialized Products segment's trade sales declined 9% from the prior-year figure to $242.9 million. The downside was due to a 10% year-over-year decline in volumes, thanks to weak demand in Aerospace and Hydraulic Cylinders. Currency boosted sales by 1%. Adjusted EBIT margin decreased 160 bps to 15%. EBITDA margin also contracted 110 bps from the prior year. Trade sales in the Furniture, Flooring & Textile Products segment improved 1% from the prior-year level to $374.9 million, mainly due to 2% lower organic sales on account of volume decline. Strong demand in Fabric Converting, Geo Components, and Home Furniture was more than offset by weak demand in Work Furniture and Flooring Products' hospitality business. The Geo Components acquisition contributed 3% to sales. Adjusted EBIT margin of 11.4% was up 320 bps from the prior year. Adjusted EBITDA margin also expanded 320 bps year over year to 13.1%. Financials
As of Sep 30, 2020, the company had $1.4 billion of liquidity, $245 million cash on hand and $1.2 billion available under the revolving credit facility.
Total debt at September-end was $2 billion. There are no significant maturities until August 2022. It expects capital expenditure to be $70 million for 2020. How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 5% due to these changes.
At this time, Legget & Platt has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. Notably, Legget & Platt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.