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Here's Why You Should Buy Leggett (LEG) Stock Right Now

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Leggett & Platt, Incorporated (LEG - Free Report) is poised to benefit from its strategies to enhance the business portfolio, disciplined capital allocation and strong demand in residential end markets.

Shares of Leggett have gained 18% over the past year compared with the Zacks Furniture industry’s 15% rise. Meanwhile, earnings estimates for 2021 have moved up 11.1% over the past 60 days. Apart from the above-mentioned tailwinds, the price performance was backed by a solid earnings surprise history. Leggett’s earnings surpassed the Zacks Consensus Estimate in the trailing eight quarters. This positive trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and expectations of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Major Growth Drivers

Implementation of Long-Term Plans

Leggett is focused on the long-term growth plan that was announced in November 2007. The first part of it was to divest low-performing businesses and the second part comprised improvement in margins and returns. To date, the company has successfully completed the first two parts of its strategic plan. Leggett is presently working on the third part of the plan that directs toward 6-9% top-line growth annually. The company’s long-term revenue target assumes 6% organic growth along with growth from acquisitions.

Additionally, Leggett has a significant operating leverage to accomplish the third part of its plan. The company has a considerable amount of retained spare production to meet product demand valuing $4 billion. As a result of the gradual phase out of pandemic, the company will certainly gain its momentum in the market that was slowed down by COVID-related disruptions. Moreover, the company is focused on the long-term EBIT margin target of 11.5-12.5%. It has plans to maintain these cost efficiencies in 2021.

Inorganic Drive Boosts Growth

Leggett — which shares space with Bassett Furniture Industries, Incorporated (BSET - Free Report) , La-Z-Boy Incorporated (LZB - Free Report) and Sleep Number Corporation (SNBR - Free Report) — depends largely on acquisition as part of its growth strategy to supplement organic growth and expand across boundaries. Although no businesses were acquired during 2020 due to the pandemic, the company intends to continue making investments to support expansion of existing businesses and product lines, wherein sales are growing profitably.

Leggett expects all acquisitions to have a clear strategic rationale and a sustainable competitive advantage. On Jan 30, 2021, the company completed an Aerospace acquisition and added 1% to sales growth for the first quarter of 2021.

Rewarding Shareholders

Leggett has been actively managing cash flows, returning considerable free cash to investors through share repurchases and dividends. On May 3, 2021, the company announced that it has raised second-quarter dividend to 42 cents per share, reflecting a 5% increase from first-quarter 2020. This marks its 50th consecutive year of annual dividend increase and places the company among 31 other companies, known as "Dividend Kings,” with at least 50 years of consecutive annual dividend increases.

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