Back to top

Image: Bigstock

Tempur Sealy (TPX) 52-Week High to Sustain on Solid Demand?

Read MoreHide Full Article

Tempur Sealy International, Inc. (TPX - Free Report) touched a new 52-week high of $46.58 on Sep 7, 2021. The stock pulled back to end the trading session at $45.57, slightly down from the previous day’s closing price of $45.80.

The company has been benefiting from strong demand for higher-margin Tempur-Pedic products in the United States. Also, continued investment in brand and product development across boundaries, innovation in assortments, solid manufacturing efficiency and quality along with the omni-channel distribution platform are adding to the bliss.

Tempur Sealy — a Zacks Rank #2 (Buy) stock — has gained 121.4% over a year, surpassing the Zacks Retail - Home Furnishings industry’s 83.8% rally and Zacks Retail-Wholesale sector’s 1.8% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, earnings estimates for 2021 have gained 14.5% over the past 60 days. This indicates 69.1% year-over-year growth. The company’s earnings surpassed analysts’ expectations in the trailing 10 quarters.

Zacks Investment Research
Image Source: Zacks Investment Research

This global leader in the design, manufacture and distribution of bedding products has an impressive VGM Score of A, supported by a Growth Score of A and Value Score of B. Back-tested results show that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 or 2 handily outperform other stocks.

Let’s delve deeper into the factors supporting growth.

Products Reinvention: Tempur Sealy is extremely focused on serving customers with something new and exciting every time they visit stores. In this regard, the company keeps on reinventing its assortments. This strategy is driving the company’s top-line performance on a year-over-year basis, lending it a competitive advantage over peers. Over the years, the company has addressed the difficulty of sleeping in high temperatures with its proprietary cooling technology. To address the snoring issue, Tempur Sealy has developed the Ergo Smart Base Sleep tracker. The company’s sleep tracker that detects and responds to snoring automatically has a monopoly in the market.

During first-quarter 2021, the company completed the rollout of the Smart Base to its North American third-party retail partners. The recently-updated Sealy mattresses offer superior support, including SealyChill and Surface-Guard technology. The company is optimistic about its long-term customer trends and anticipates higher sales price for high-tech products.

Brand Expansion & Innovation: Tempur Sealy — which shares space with RH (RH - Free Report) , The Lovesac Company (LOVE - Free Report) and Williams-Sonoma, Inc. (WSM - Free Report) in the same industry — is one of the largest brands in the United States. The company’s Sealy brand was regarded as America's #1 selling mattress brand in 2020. Sealy is America's most trusted mattress brand according to the 2021 Brand Spark American Trust study. The company continues to innovate and invest in product development. During 2021, Tempur Sealy is expected to remodel the Sealy portfolio with the launch of new models across essential Posturepedic and Posturepedic Plus brand lineups. The company is optimistic about these products and expects the continuation of Sealy's lead as the #1 brand of mattress in the United States.

Tempur Sealy has been witnessing strong customer demand for the brand. The company’s Stearns & Foster brand is celebrating its 175th anniversary in 2021. During first-half 2021, the company delivered robust performance across North America and international segments, primarily driven by growth across its brands, channels and price points.

Upbeat View: Tempur Sealy is optimistic about business growth, given improved business trends and the acquisition of Dreams. It has also been witnessing higher demand across the business, thereby aiding backlog growth.

During the second quarter of 2021, Tempur Sealy raised its full-year 2021 net sales and earnings guidance. For the full year, the company expects net sales growth to exceed 35% and adjusted earnings per share in the range of $3.10-$3.25, indicating an increase from the year ago figure of $1.94. It also expects adjusted EBITDA of $1.1 billion, suggesting growth from the previous year’s $779.9 million.

Higher ROE: Tempur Sealy’s superior return on equity (ROE) is also indicative of growth potential. The company’s ROE currently stands at 142.3%. This compares favorably with ROE of 34.8% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and Tempur Sealy’s ability to generate profit with minimum capital usage.