Mattress manufacturer Tempur-Pedic's (NYSE: TPX) latest quarter firmed up nicely. The market tacked on $2.29 (10.86%) to its share price on Friday, following the release of the results.
For the quarter, Tempur-Pedic recorded net income of $30.5 million, or $0.36 a share, compared with $30.4 million, or $0.30 a share, in the fourth quarter of 2005. The proportionally greater increase in per-share earnings resulted from a reduction in the number of diluted shares outstanding from 99.6 million to 85.7 million.
Excluding special charges related to taxes and early debt repayment, Tempur-Pedic earned $0.40 a share, up from $0.31 year over year. Analysts had expected $0.36 per fully diluted share. At the same time, revenues in the quarter increased 19% to $256.6 million, up from $215.6 million the prior year.
In the release, President and CEO H. Thomas Bryant noted: "In the fourth quarter, our U.S. operations continued to demonstrate outstanding performance, resulting in significantly improved mattress unit growth and account productivity. We continue to grow market share and gained retail floor space. Our initiatives to improve pillow sales are having the desired impact."
Bryant also noted that, despite weak pillow sales in Japan, international pillow sales and unit volumes increased, along with international market-share gains in mattresses.
Beyond its quarterly results, the company announced that its new Albuquerque factory is up and running and that its board has approved a quarterly cash dividend of $0.06 per share, starting in March.
Tempur-Pedic competes most directly with Motley Fool Hidden Gems selection Select Comfort (Nasdaq: SCSS) and rival Sealy (NYSE: ZZ). For all the softness of its products, the company itself is respectably solid. It sports a healthy number of shares outstanding, a reasonably attractive five-year PEG ratio (the P/E ratio divided by expected earnings growth) of 1.1, and an usually robust 50% return on equity over the past 12 months. Only Tempur-Pedic's debt-to-equity ratio of 2:1 should give Foolish investors pause here.
Due diligence is always a Foolish move, and Tempur-Pedic should be no exception. Still among the ranks of small-to-mid-cap investing ideas, this one looks downright dreamy.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions.
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