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Factors Setting the Tone for Leggett's (LEG) Q4 Earnings

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Leggett & Platt, Incorporated (LEG - Free Report) is slated to release fourth-quarter 2019 results on Feb 3, after market close.

In the last reported quarter, the company came up with better-than-expected results, wherein earnings and net sales topped the Zacks Consensus Estimate by 13% and 2%, respectively. Also, the metrics rose 15.2% and 13.5% from the year-ago level, respectively.

Strong sales in Automotive, U.S. Spring and Work Furniture, solid contributions from the Elite Comfort Solutions or ECS acquisition, and continued market share and content gains in U.S. Spring led to the upside. However, lower volume from businesses exited in Fashion Bed and Home Furniture, along with weak trade in the Industrial Products segment partly offset the same.

Trend in Estimate Revision

The Zacks Consensus Estimate for earnings for the quarter to be reported has been unchanged at 66 cents per share over the past 60 days. The said figure indicates a 6.5% increase from the year-ago earnings of 62 cents per share. The consensus mark for revenues is $1.16 billion, suggesting a 10.6% year-over-year improvement.

Leggett & Platt, Incorporated Price and EPS Surprise

Factors to Note

Leggett’s fourth-quarter 2019 earnings are likely to have benefited from long-term strategic plan, accretive acquisitions and moderating steel inflation.

The company has already executed the first two parts of the strategic plan, which comprises divesture of low-performing businesses, and an improvement in margins and returns. It is now working on the third part of the plan that aims at achieving top-line growth of 4-5% annually. The positive impacts of these initiatives are expected to have strengthened its bottom line in to-be-reported quarter.

Moreover, Leggett’s systematic inorganic drive, which has been strongly contributing to top-line growth, should have given a meaningful boost to total sales in fourth-quarter 2019.

The Zacks Consensus Estimate for Residential Products’ net sales is currently pegged at $574 million, implying a 36.6% year-over-year increase. Moreover, the same for sales from the Specialized Products segment is $267 million, indicating a rise of 2.9% from the year-ago period. However, the consensus mark for net sales from Industrial Products is pegged at $68 million, pointing to 25.8% year-over-year decline. The same for Furniture Products’ net sales is $248 million, implying fall of 9.9% year over year.

In a nutshell, the company is expected to have benefited from strategic moves and sales growth in different channels in the fourth quarter despite low volumes from exited businesses.

What Our Model Suggests

Our proven model doesn’t conclusively predict an earnings beat for Leggett this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Leggett — which shares space with WillScot Corporation WSC, Masonite International Corporation DOOR and Virco Mfg. Corporation VIRC in the Zacks Furniture industry — has an Earnings ESP of 0.00% and currently carries a Zacks Rank #3. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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