Don't sleep on mattress stocks. Sleep Number (NASDAQ:SNBR) has now more than quadrupled from its initial pandemic lows, and the maker of air-chambered beds with adjustable firmness settings is showing no signs of slowing down.

Sleep Number came through with another monster quarter shortly after Wednesday's market close. Its Sleep Number 360 mattress -- billed by the company as the industry's first smart bed because it monitors sleep patterns and adjusts its firmness accordingly -- is a hit. It probably also only helps that folks are spending more time around the house these days, and upgrading furniture, appliances, and bedding makes perfect sense. 

A couple resting on a Sleep Number bed with one side of the bed raised.

Image source: Sleep Number.

Letting the bed bugs bite

Net sales rose 12% in the third quarter, and that may not seem like much, but analysts were only holding out for a 9% climb. Sleep Number withdrew its guidance in late March when the COVID-19 crisis was intensifying and most of its showrooms were closing down. Wall Street pros were all that investors had to go on, and those analysts got smoked.

Comps rose 11% for the summertime quarter. Online and phone sales more than doubled, soaring 111% and accounting for 14% of net sales. With its balance sheet and cash flows improving, this isn't just a top-line story. The real head-turning achievement is taking place on the bottom line.

Sleep Number's operating income climbed 78% for the third quarter, and earnings skyrocketed 90% to land at $1.79 per share. Analysts were modeling a profit of $1 per share, barely above the prior year's showing. Sleep Number has routinely beaten Wall Street profit targets, but this is the third time in a row that it has landed at least 33% ahead of where the analysts were perched. 

This story gets better. Remember how Sleep Number wasn't offering guidance just a couple of months ago? Well, it has no problem being chatty right now. The high-tech sleep specialist sees earnings of $4 a share for all of 2020, 48% above the $2.70 a share it rang up last year. Analysts were expecting a marginal net income uptick to $2.77 a share. Sleep Number sees net sales rising 7% to 8% for the year, another top-line number that may not seem so impressive at first glance for a growth stock but it's strong in the proper context. Net sales have moved just 6% higher through the first nine months of the year, weighed down by a 20% plunge in sales during the second quarter with most of its showrooms shuttered. Even with an extra week in this final quarter padding results it's still an amazing turnaround for Sleep Number.

Wall Street gets it. The shares have never traded as high as they are right now. Despite hitting all-time highs Sleep Number is resuming its share buybacks in the current quarter, suggesting either that Sleep Number has run out of uses for its improving cash flows or that it thinks the shares will only get higher from here. With everything going right for Sleep Number, it's easy to see why its shareholders are sleeping as comfortably as its customers.