Will Tempur-Pedic's New Strategy Pay Off?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

On Thursday, Tempur-Pedic (NYSE: TPX  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

The mattress market has been an up-and-down roller-coaster ride for investors in recent years, as Tempur-Pedic has gone from lightning-fast growth to a big slowdown as the overall economy has been volatile. But Tempur-Pedic's recent purchase of Sealy promises big changes for the company going forward. Let's take an early look at what's been happening with Tempur-Pedic over the past quarter and what we're likely to see in its quarterly report.

Stats on Tempur-Pedic

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$347.27 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Tempur-Pedic make its investors comfortable this quarter?
Analysts have gotten a lot more optimistic about Tempur-Pedic's long-term earnings prospects lately. Although they've kept first-quarter estimates unchanged, they've raised their calls for 2013 and 2014 by 15% and 23% respectively, showing enthusiasm over improving conditions. The stock has also responded favorably, soaring nearly 30% since late January.

The big news for Tempur-Pedic this quarter was the completion of its buyout of Sealy in mid-March. With the company planning to change its name to Tempur Sealy, Tempur-Pedic presented a broad capital restructuring plan that involves redeeming more than half a billion dollars in high-yield Sealy debt.

Yet the key to the move for Tempur-Pedic is to stand up to increasingly fierce competition in the industry. Select Comfort (NASDAQ: SCSS  ) bought premium mattress-maker Comfortaire in January, eliminating a rival in its air-filled mattress segment. Yet while Select Comfort has cemented its status at the high-end of the mattress market with its Comfortaire buy, Tempur-Pedic is aiming to incorporate more of the lower end of the spectrum, where it more directly goes up against Mattress Firm (NASDAQ: MFRM  ) . Mattress Firm has posted promising results serving that niche, and Tempur-Pedic hopes to grab its share of customers with its Sealy products.

Tempur-Pedic hopes that macroeconomic trends will start to turn in its favor. As the housing market rebounds, most economists expect for home furnishings to follow suit. That could benefit the entire industry, and depending on which areas of the housing market perform best, Tempur-Pedic could see greater strength in its high-end namesake products or in the more value-conscious Sealy brand.

In Tempur-Pedic's report, be sure to compare the company's relative performance against Select Comfort's report from last week. Despite expectations that an improving housing market would boost sales, Select Comfort saw a 2% revenue drop on 9% lower same-store sales. Yet if Tempur-Pedic shows the same headwinds on sales, it could spell trouble for the entire industry.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Click here to add Tempur-Pedic to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (2)

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.

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: 2398959, ~/Articles/ArticleHandler.aspx, 9/30/2016 2:55:38 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 5 hours ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

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

9/29/2016 4:02 PM
TPX $55.24 Down -2.53 -4.38%
Tempur Sealy Inter… CAPS Rating: ***
MFRM $0.00 Down +0.00 +0.00%
Mattress Firm Hold… CAPS Rating: *
SCSS $22.25 Down -0.57 -2.50%
Select Comfort CAPS Rating: *****