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Leggett & Platt's (LEG) Q4 Earnings Beat Estimates, Stock Down

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Leggett & Platt, Incorporated (LEG - Free Report) reported impressive fourth-quarter 2020 results, with the top and the bottom line beating the Zacks Consensus Estimate and increasing year over year.

However, following the earnings release, the company’s shares slipped 1.7% during after-hour trading session on Feb 8, 2021. Investors’ sentiments might have been negatively impacted by the supply chain constraints and commodity costs inflation induced by the uncertainty related to the COVID-19 pandemic. Nonetheless, the company is optimistic about the long-term health on the back of strong consumer demand for home-related items and global automotive.

Quarter in Details

During the fourth quarter, Leggett reported adjusted earnings of 76 cents per share, which beat the Zacks Consensus Estimate of 70 cents by 8.6%. Also, the figure increased 11.8% year over year owing to higher EBIT.

Leggett & Platt, Incorporated Price, Consensus and EPS Surprise

 

Leggett & Platt, Incorporated Price, Consensus and EPS Surprise

Leggett & Platt, Incorporated price-consensus-eps-surprise-chart | Leggett & Platt, Incorporated Quote

 

Total sales in the quarter came in at $1,182 million, which surpassed the consensus mark of $1,149 million by 2.9%. The top line also increased 3.2% on a year-over-year basis. The upside was primarily driven by 3% rise in organic sales. During the quarter, volume increased 1% year over year owing to strong demand in residential end markets and Automotive. However, this was offset by weakness in Aerospace and Work Furniture. Nonetheless, rise in raw material-related selling price along with currency benefits contributed 2% to fourth-quarter sales.

Adjusted EBIT margin expanded 50 basis points (bps) year over year to 12.7%, benefiting from fixed-cost reductions. Adjusted EBITDA margin also expanded 40 bps year over year to 16.8%.

Segment Details

During the fourth quarter, net trade sales in Bedding Products increased 3% year over year to $548.3 million. The upside was driven by higher demand in ECS and U.S. and European Spring, partially offset by lower volume in Adjustable Bed and exited volume in Drawn Wire. Adjusted EBIT margin increased 40 bps to 11.6%. Adjusted EBITDA margin also grew 20 bps year over year to 16.5%.

The Specialized Products segment's trade sales during the fourth quarter inched up 1% year over year to $273 million. Notably, currency boosted sales by 3% year over year. However, the company witnessed 2% year-over-year decline in volumes due to weak demand in Aerospace, partially offset by growth in Automotive. Adjusted EBIT margin increased 70 bps year over year to 18.8%. Adjusted EBITDA margin also expanded 100 bps year over year to 23.1%.

During the quarter, trade sales in the Furniture, Flooring & Textile Products segment rose 5% year over year to $360.7 million. The upside was primarily driven by strong demand in Fabric Converting, Geo Components and Home Furniture. This was partially offset by weak demand in Work Furniture and Flooring Products' hospitality business. Notably, volumes increased 2% year over year. This along with the Geo Components acquisition and currency benefits contributed 2% and 1%, respectively, to fourth-quarter segment sales. Meanwhile, Adjusted EBIT margin increased 60 bps year over year to 9.6%. Adjusted EBITDA margin also expanded 60 bps year over year to 11.4%.

Financials

As of Dec 31, 2020, the company had $1.5 billion of liquidity, $349 million cash on hand and $1.2 billion available under the revolving credit facility.

Total debt at December-end was $2 billion. There are no significant maturities until August 2022.

The company’s board of directors announced a dividend of 40 cents per share. The dividend is payable on Apr 15, 2021, to shareholders of record at the close of business as of Mar 15.

2020 Highlights

Net revenues in 2020 came in at $4,280.2 million compared with $4,752.5 million in 2019.

Net cash flow from Operating activities in 2020 came in at $602.6 million compared with $668 million in 2019.

In 2020, adjusted earnings per share (EPS) came in at $2.13 compared with $2.57 in the previous year.

2021 Guidance

For 2021, the company expects sales in the range of $4.6–$4.9 billion that indicates growth of 7-14% compared with prior-year levels.  Notably, rise in raw material-related price along with currency benefits are likely to boost sales.

2021 EPS is expected between $2.30 and $2.60. The company expects EBIT margin between 10.5% and 11%.

Meanwhile, capital expenditures, depreciation and amortization and operating cash flow for 2021 are estimated at $150 million, $195 million and $450 million, respectively. Also, effective tax rate is concluded at 23%.

Zacks Rank

Leggett — which shares space with Masonite International Corporation (DOOR - Free Report) , American Woodmark Corporation (AMWD - Free Report) and WillScot Corporation (WSC - Free Report) in the Zacks Furniture industry — currently carries a Zacks Rank #4 (Sell).

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

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