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Leggett & Platt, Inc. (LEG - Free Report) reported tepid second-quarter 2023 results wherein earnings and sales missed the Zacks Consensus Estimate.
Furthermore, the bottom and the top lines declined on a year-over-year basis. The downtrend was caused by the weak demand in Bedding Products and Furniture, Flooring & Textile Products segments, and the volatile macroeconomic environment.
Following the results, the shares of the company declined 3.32% in the after-hour trading session on Jul 31. Investors' sentiments might have been hurt by the lower 2023 guidance for net sales and earnings.
Quarter in Detail
Leggett reported adjusted earnings of 38 cents per share, which missed the Zacks Consensus Estimate of adjusted earnings of 39 cents per share by 2.6%. Also, the bottom line decreased 45.7% from 70 cents per share reported a year ago.
Leggett & Platt, Incorporated Price, Consensus and EPS Surprise
Trade sales of $1.22 billion missed the consensus mark of $1.24 billion by 1.6%. The metric also declined 8% from the prior-year quarter’s levels of $1.33 billion.
Organically, sales were down 11% year over year. Raw-material-related selling prices ailed the results by 5%. Volume was down 6% due to continued demand softness in residential end markets, partially offset by growth in the Automotive, Aerospace, and Hydraulic Cylinders businesses. Currency impact on sales was flat year over year. That said, acquisitions contributed 3% to sales growth.
Adjusted EBIT declined 36% from the prior-year quarter’s levels to $92.1 million. The downside was due to lower volume in residential end markets and lower metal margin in the Steel Rod business. This was partially offset by $3.6 million gain from net insurance proceeds from tornado damage at the company’s Home Furniture manufacturing facility.
Adjusted EBIT margin contracted 320 basis points (bps) to 7.5% from the year-ago quarter’s figure. Adjusted EBITDA margin also declined 290 bps to 11.2%.
Segment Details
Bedding Products: Net trade sales (excluding intersegment sales) decreased 18% (all organic) from the year-ago quarter’s levels to $504.4 million. A 9% decline in volume, primarily caused by softness in the bedding markets and lower trade demand in Steel Rod and Drawn Wire businesses impacted the downtrend. This was partially offset by growth in the Specialty Foam business. Raw-material-related selling price impacted sales 9%.
Adjusted EBIT margin fell 690 bps to 4.4%. Adjusted EBITDA margin also contracted 610 bps year over year to 9.5%.
Specialized Products: Trade sales rose 23% as reported and 12% organically from the prior-year quarter to $321.2 million. This segment’s sales topped our model’s prediction of $295.8 million by 8.6%.
Volume increased by 13% across the segment. A favorable raw material-related selling price increased sales 1% and Hydraulic Cylinders acquisition contributed 11%. Currency woes lowered sales by 2%.
EBIT margin expanded by 210 bps to 10.3%. EBITDA margin also grew 150 bps year over year to 13.5%.
Furniture, Flooring & Textile Products: Trade sales declined 14% from the prior-year quarter’s level to $395.6 million. Organically, the figure declined 16% year over year. Volume was down 14% across the segment. Raw-material-related selling price decline reduced sales by 2%. Textiles acquisitions added 2% to the growth.
Adjusted EBIT margin of 9.1% was down 200 bps from the prior year. Adjusted EBITDA margin also contracted 190 bps to 10.5%.
Financials
As of Jun 30, the company had $632 million in liquidity. It had $272.4 million of cash and equivalents at second-quarter 2023 end, down from $316.5 million at 2022 end.
Long-term debt was $2.02 billion, down 3% from $2.07 billion from 2022 end. The trailing 12-month net debt-to-adjusted EBITDA was 3.10x at second-quarter end, compared with 2.39x in the year-ago period and 2.66x at 2022 end.
Cash from operations for the reported quarter totaled $110.6 million, compared with $89.8 million in the prior year. Capital expenditures were $30 million in the second quarter, compared with $22 million in the previous year.
Lowered 2023 Sales & Earnings Per Share Guidance
Leggett now expects sales in the range of $4.75–$4.95 billion (previously expected $4.8-$5.2 billion), indicating a decline of 4% to 8% year over year owing low expected volume in residential end markets. Volumes are expected to decline mid-single digits at the midpoint. Raw-material-related price decrease and currency impact are likely to reduce sales by mid-single digits, while acquisitions are expected to aid the same by 3%.
Sales are likely to be down mid to high-single digits in the Bedding Products and Furniture, Flooring & Textile Products segments. Nonetheless, the same is expected to be up high single-digits in Specialized Products.
Earnings are projected to be between $1.45 per share and $1.65 per share (previously expected in the range of $1.50-$1.90 per share). This excludes about 5 cents per share gain from net insurance proceeds from tornado damage. LEG expects adjusted EBIT margin to be in the range of 7.3-7.7%, compared to the previously expected range of 7.5-8%.
Capital expenditures, depreciation and amortization costs, and operating cash flow are estimated to be $100-$130 million, approximately $200 million and $450–$500 million, respectively. Dividend and net interest expenses are likely to be nearly $240 million and $85 million, respectively. Effective tax rate for the year is anticipated to be 24%. Fully diluted shares are projected to be approximately 137 million.
Boyd Gaming Corporation (BYD - Free Report) reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Both metrics surpassed the consensus mark for the 13th straight quarter. Also, the top and bottom lines increased on a year-over-year basis.
BYD’s quarterly results benefited from online gaming and Sky River Casino.
JAKKS Pacific, Inc. (JAKK - Free Report) reported second-quarter 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Revenues surpassed the consensus estimate for the seventh straight quarter. However, both the metrics declined on a year-over-year basis.
During the quarter, the company reported an adjusted earnings per share (EPS) of $1.26, beating the Zacks Consensus Estimate of 47 cents. In the prior-year quarter, JAKK reported an adjusted EPS of $2.10.
Royal Caribbean Cruises Ltd. (RCL - Free Report) reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis.
RCL benefited from robust demand, strong pricing (on closer-in demand) and solid onboard spending.
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Leggett & Platt (LEG) Lags Q2 Earnings & Sales, Lowers Guidance
Leggett & Platt, Inc. (LEG - Free Report) reported tepid second-quarter 2023 results wherein earnings and sales missed the Zacks Consensus Estimate.
Furthermore, the bottom and the top lines declined on a year-over-year basis. The downtrend was caused by the weak demand in Bedding Products and Furniture, Flooring & Textile Products segments, and the volatile macroeconomic environment.
Following the results, the shares of the company declined 3.32% in the after-hour trading session on Jul 31. Investors' sentiments might have been hurt by the lower 2023 guidance for net sales and earnings.
Quarter in Detail
Leggett reported adjusted earnings of 38 cents per share, which missed the Zacks Consensus Estimate of adjusted earnings of 39 cents per share by 2.6%. Also, the bottom line decreased 45.7% from 70 cents per share reported a year ago.
Leggett & Platt, Incorporated Price, Consensus and EPS Surprise
Leggett & Platt, Incorporated price-consensus-eps-surprise-chart | Leggett & Platt, Incorporated Quote
Trade sales of $1.22 billion missed the consensus mark of $1.24 billion by 1.6%. The metric also declined 8% from the prior-year quarter’s levels of $1.33 billion.
Organically, sales were down 11% year over year. Raw-material-related selling prices ailed the results by 5%. Volume was down 6% due to continued demand softness in residential end markets, partially offset by growth in the Automotive, Aerospace, and Hydraulic Cylinders businesses. Currency impact on sales was flat year over year. That said, acquisitions contributed 3% to sales growth.
Adjusted EBIT declined 36% from the prior-year quarter’s levels to $92.1 million. The downside was due to lower volume in residential end markets and lower metal margin in the Steel Rod business. This was partially offset by $3.6 million gain from net insurance proceeds from tornado damage at the company’s Home Furniture manufacturing facility.
Adjusted EBIT margin contracted 320 basis points (bps) to 7.5% from the year-ago quarter’s figure. Adjusted EBITDA margin also declined 290 bps to 11.2%.
Segment Details
Bedding Products: Net trade sales (excluding intersegment sales) decreased 18% (all organic) from the year-ago quarter’s levels to $504.4 million. A 9% decline in volume, primarily caused by softness in the bedding markets and lower trade demand in Steel Rod and Drawn Wire businesses impacted the downtrend. This was partially offset by growth in the Specialty Foam business. Raw-material-related selling price impacted sales 9%.
Adjusted EBIT margin fell 690 bps to 4.4%. Adjusted EBITDA margin also contracted 610 bps year over year to 9.5%.
Specialized Products: Trade sales rose 23% as reported and 12% organically from the prior-year quarter to $321.2 million. This segment’s sales topped our model’s prediction of $295.8 million by 8.6%.
Volume increased by 13% across the segment. A favorable raw material-related selling price increased sales 1% and Hydraulic Cylinders acquisition contributed 11%. Currency woes lowered sales by 2%.
EBIT margin expanded by 210 bps to 10.3%. EBITDA margin also grew 150 bps year over year to 13.5%.
Furniture, Flooring & Textile Products: Trade sales declined 14% from the prior-year quarter’s level to $395.6 million. Organically, the figure declined 16% year over year. Volume was down 14% across the segment. Raw-material-related selling price decline reduced sales by 2%. Textiles acquisitions added 2% to the growth.
Adjusted EBIT margin of 9.1% was down 200 bps from the prior year. Adjusted EBITDA margin also contracted 190 bps to 10.5%.
Financials
As of Jun 30, the company had $632 million in liquidity. It had $272.4 million of cash and equivalents at second-quarter 2023 end, down from $316.5 million at 2022 end.
Long-term debt was $2.02 billion, down 3% from $2.07 billion from 2022 end. The trailing 12-month net debt-to-adjusted EBITDA was 3.10x at second-quarter end, compared with 2.39x in the year-ago period and 2.66x at 2022 end.
Cash from operations for the reported quarter totaled $110.6 million, compared with $89.8 million in the prior year. Capital expenditures were $30 million in the second quarter, compared with $22 million in the previous year.
Lowered 2023 Sales & Earnings Per Share Guidance
Leggett now expects sales in the range of $4.75–$4.95 billion (previously expected $4.8-$5.2 billion), indicating a decline of 4% to 8% year over year owing low expected volume in residential end markets. Volumes are expected to decline mid-single digits at the midpoint. Raw-material-related price decrease and currency impact are likely to reduce sales by mid-single digits, while acquisitions are expected to aid the same by 3%.
Sales are likely to be down mid to high-single digits in the Bedding Products and Furniture, Flooring & Textile Products segments. Nonetheless, the same is expected to be up high single-digits in Specialized Products.
Earnings are projected to be between $1.45 per share and $1.65 per share (previously expected in the range of $1.50-$1.90 per share). This excludes about 5 cents per share gain from net insurance proceeds from tornado damage. LEG expects adjusted EBIT margin to be in the range of 7.3-7.7%, compared to the previously expected range of 7.5-8%.
Capital expenditures, depreciation and amortization costs, and operating cash flow are estimated to be $100-$130 million, approximately $200 million and $450–$500 million, respectively. Dividend and net interest expenses are likely to be nearly $240 million and $85 million, respectively. Effective tax rate for the year is anticipated to be 24%. Fully diluted shares are projected to be approximately 137 million.
Zacks Rank
Leggett currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Consumer Discretionary Releases
Boyd Gaming Corporation (BYD - Free Report) reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Both metrics surpassed the consensus mark for the 13th straight quarter. Also, the top and bottom lines increased on a year-over-year basis.
BYD’s quarterly results benefited from online gaming and Sky River Casino.
JAKKS Pacific, Inc. (JAKK - Free Report) reported second-quarter 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Revenues surpassed the consensus estimate for the seventh straight quarter. However, both the metrics declined on a year-over-year basis.
During the quarter, the company reported an adjusted earnings per share (EPS) of $1.26, beating the Zacks Consensus Estimate of 47 cents. In the prior-year quarter, JAKK reported an adjusted EPS of $2.10.
Royal Caribbean Cruises Ltd. (RCL - Free Report) reported second-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis.
RCL benefited from robust demand, strong pricing (on closer-in demand) and solid onboard spending.