Foolish Forecast: Sealy Seeks a Nice Bounce

Sleepytime specialist Sealy (NYSE: ZZ) is scheduled to release earnings tomorrow after the market closes. Will investors be able to rest well after the release? Or will the results be a nightmare?

What analysts say:

• Buy, sell, or waffle? Eight analysts follow the company. Three are bullish, one thinks investors should put the company to rest, and four are saying to lie down and not go anywhere.
• Revenue. The average estimate is $444.4 million, an increase of 7.1% from last year.
• Earnings. The consensus earnings estimate is $0.32 a share, up 6.7% from last year. Forecasts range from $0.29 to $0.36 a share.

What management says:
Last quarter, the company discussed the challenging environment and the impact from soft consumer spending. However, management said it is operating the business with long-term growth in mind -- which is what we like to hear -- and believes that the business will be well positioned to thrive again once the industry returns to its historical sales-growth rates.

What management does:
Gross margin has slipped as the average sales price has declined and material costs have risen. However, management stated in the last quarter that it believes it can improve the gross margin from its specialty business and expand on the high-end product line. Additionally, it has recently begun to work on its higher-priced Posturepedic products, which should also enhance sales and margin expansion.

Margin	2/26/06	5/28/06	8/27/06	11/26/06	2/25/07	5/27/07
Gross	44.4%	44.6%	44.4%	44.7%	44.3%	43.8%
Op.	14%	13.8%	13.6%	14%	13.7%	13.1%
Net	4.7%	4.2%	4.4%	4.7%	4.7%	5.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The Motley Fool CAPS community is about as bearish as you can get on a company -- Sealy only garners a one-star rating there, our of a possible five. However, Sealy has been working on updating its models to help keep up with the competition, including Select Comfort (Nasdaq: SCSS) and Tempur-Pedic (NYSE: TPX). If the company can continue to improve its domestic unit volume from promotions, expand internationally, and capture customer loyalty, investors might just find this a comfortable place to invest.

Grab your pillow, pull up a blanket, and catch some Foolish bedtime reading:

• Time to Sleep on Sealy?
• Fitful Rest From Sealy
• Wake Up, Select Comfort