Why Tempur-Pedic's Shares Jumped

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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 (NYSE: TPX  ) were bouncing higher today, gaining as much as 17% in intraday trading after the company reported second-quarter earnings.

So what: It's a good thing Tempur-Pedic prepared investors for a lackluster quarter. Last month the company told investors that the second quarter wouldn't look so hot thanks to a lull in North American sales. But shareholders were able to celebrate a bit today, as results weren't pretty, though not as bad as Wall Street had expected. For the quarter, total revenue fell 4% from last year to $330 million, while earnings per share slumped from $0.76 last year to $0.45. Analysts, however, had estimated $0.38 in per-share profit for the quarter on $328 million in sales.

Now what: If there was a true highlight of the quarter, it was that international sales held up despite the slump in North America. While North American sales fell 8% year over year, international sales climbed 8%. Tough economic times probably have a lot to do with the lousy sales climate, but Tempur-Pedic management is pulling the levers it has available -- including cutting costs and unveiling "new initiatives" aimed at giving it an edge against competitors.

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The Motley Fool owns shares of Tempur-Pedic International. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.

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10/27/2016 3:00 PM
TPX $54.63 Up +3.63 +7.12%
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