Why Tempur-Pedic Shares Got Slammed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mattress maker Tempur-Pedic International (NYSE: TPX  ) plunged a whopping 47% on Wednesday after management slashed its current-quarter and full-year guidance.

So what: Tempur-Pedic was one of the market's hottest stocks over the first three months of 2012, but the gloomy outlook reinforces recent fears over rapidly intensifying competition in North America. Unfortunately, those concerns are being compounded by disappointing results today from rival Mattress Firm Holding (Nasdaq: MFRM  ) , all of which are working to push down the shares of Sealy (NYSE: ZZ  ) as well.

Now what: Tempur-Pedic now expects full-year EPS of $2.70 on revenue of $1.43 billion, well below Wall Street's view of $3.93 and $1.64 billion, respectively. "We are projecting lower sales than previously anticipated for the rest of the year and are taking actions to realign our expense structure appropriately," said CEO Mark Sarvary. "However, we remain very confident in our Company's growth potential and our strong brand, and as a result remain committed to our long-term strategic plan." With the stock now down a staggering 75% from its April highs, brave bargain-hunters might want to consider buying into that optimism.

Interested in more info on Tempur-Pedic? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of Tempur-Pedic. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 06, 2012, at 2:41 PM, prginww wrote:

    Interesting thesis. But I think I know the REAL reason these shares got slammed today. It's because the market found out that I bought some shares yesterday! Ooof...

  • Report this Comment On June 06, 2012, at 3:26 PM, prginww wrote:

    This move seems a little overblown. Even with the new guidance, $22.51 gives the stock an 8.3 Forward P/E. On the other hand, as the owner of a perfectly good knockoff mattress that cost a third of the price of a Tempur Pedic, I've long wondered what competitive advantage the company had that was fueling the recent earnings growth.

  • Report this Comment On June 06, 2012, at 10:01 PM, prginww wrote:

    @TMFTheDoctor, as a TPX mattress owner, I've been very happy with my celebrity mattress. Reading reviews from the knockoffs (Therapedic, iComfort etc.), from various sources, it seems there's been a problem with people having a great showroom feel with some of the knockoffs and then having issues with loss of support and sag when it comes to 6-12 mos later.

  • Report this Comment On June 07, 2012, at 2:07 PM, prginww wrote:

    I am wondering if the 97.7 % institutional ownership (maybe a bit old considering the selling) and the 10% shorts (also now old) had more to do with this than anything else....

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1904786, ~/Articles/ArticleHandler.aspx, 10/24/2016 1:38:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
TPX $51.70 Down -0.70 -1.34%
Tempur Sealy Inter… CAPS Rating: ****
MFRM $0.00 Down +0.00 +0.00%
Mattress Firm Hold… CAPS Rating: *
ZZ.DL $0.00 Down +0.00 +0.00%
Sealy Corporation CAPS Rating: No stars