Please ensure Javascript is enabled for purposes of website accessibility

Select Comfort Stock Bounces Back Quickly

By Rick Munarriz - Jul 19, 2017 at 9:10AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The maker of Sleep Number beds recovers after posting initially poorly received quarterly results.

Tuesday was a trading day of redemption for Select Comfort (SNBR 2.10%) shareholders. Shares of the company behind the Sleep Number adjustable air-chambered mattress opened nearly 3% lower, only to close out the session 1.4% higher. That's a big turnaround for a stock that was trading as much as 10% lower in after-hours trading on Monday, after the company posted mixed financial results.

Select Comfort saw net sales climb 3% to $284.7 million, well short of the 8% analysts were expecting. It also posted a net loss of $0.02 a share; Wall Street pros were holding out for a small profit. Falling short on both ends of the income statement is never pretty, but the results come with some asterisks. A new supplier's inventory shortage caused a week's worth of deliveries to be delayed, pushing $25 million of net sales into the third quarter. The shipment hiccup resulted in a an estimated $0.12 hit to earnings. Adjust results for the delayed deliveries, and Select Comfort's profit of $0.10 a share and net sales of nearly $310 million would've been well ahead of analyst targets.

A Sleep Number bed with the app running.

Image source: Select Comfort.

Airing things out

It took a few hours for Wall Street's opinion to turn on Select Comfort, and it only helps that Stifel analyst John Baugh reiterated his bullish rating on Tuesday morning, as he raised his price target from $32 to $36. He sees strong demand for the recently introduced Sleep Number 360, billed as the industry's first smart bed. He thinks the supplier issue is isolated and not a long-term distraction. 

Sleep Number 360 is a potential game changer. The new mattress uses intelligent biometrics that can adjust the bed's firmness and elevation if someone is snoring or tossing and turning. The first two models hit Select Comfort stores by the end of May. 

Select Comfort still expects earnings per share this year to clock in between $1.25 and $1.50, including a $0.15 to $0.22 hit for one-time costs related to the launch of Sleep Number 360 and tweaks to its supply chain. It's also sticking to its goal of $2.75 a share in earnings come 2019.

The quarter wasn't perfect. The company didn't raise its full-year guidance the way it did during its blowout first quarter three months earlier. There also wasn't any reason to believe that the rumored combination with Tempur Sealy International (TPX 2.74%) -- chatter that propelled both stocks higher -- is legit. Select Comfort wasn't going to mention it, and analysts didn't bring Tempur Sealy up during the call. The only big change in plans appears to be Select Comfort's planned name change to Sleep Number later this year,

Select Comfort is typically a big mover the day after it posts quarterly results, so yesterday's 1.4% gain on Tuesday may seem anticlimactic. However, the market's quick turn on the numbers -- going from brutally bearish to mildly optimistic -- shows that volatility is still alive and well here. 

Rick Munarriz owns shares of Select Comfort. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sleep Comfort Corporation Stock Quote
Sleep Comfort Corporation
SNBR
$47.20 (2.10%) $0.97
Tempur Sealy International, Inc. Stock Quote
Tempur Sealy International, Inc.
TPX
$28.52 (2.74%) $0.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.