Why Tempur-Pedic Shares Got Crushed

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 sleep specialist Tempur-Pedic (NYSE: TPX  ) woke up on the wrong side of the bed today after a nightmarish earnings report sent the stock plummeting as much as 23%.

So what: The mattress maker cut its 2012 EPS forecast from $2.80 to $2.55 and trimmed revenue projections from $1.43 billion to $1.4 billion on overall weakness. Adjusted EPS of $0.70 actually beat estimates by a penny, but that was far from last year's $0.90 per share in profit. Revenue declined 9% to $347.9 million, and mattress sales in North America decreased by 15% in the quarter as competition ate into its market leadership. CEO Mark Sarvary said, "Changes in the competitive environment that we experienced during the second quarter in North America continue to have an adverse impact on our third quarter performance."

Now what: Tempur-Pedic shares have been decimated over the last six months, falling 70% since April amid slowing sales and competitive concerns. At a P/E of eight, this stock might look cheap, but investors would be better off waiting for positive sales growth before jumping on board. Tempur-Pedic's acquisition of Sealy (NYSE: ZZ  ) last month also seems a further sign that this growth engine has run its course. Investors will want to keep an eye on the effects of the Sealy deal, which is expected to close in the first half of next year.

Don't lose sleep over Tempur-Pedic. Add the company to your watchlist for regular updates on the stock.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Tempur-Pedic International. 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 Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

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.

Be the first one to comment on this article.

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: 2073671, ~/Articles/ArticleHandler.aspx, 9/20/2014 8:25:46 PM

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...


Advertisement