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Why Tempur Sealy International Stock Just Popped

By Rich Smith - Feb 11, 2021 at 11:22AM

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With earnings booming, the mattress maker's investors jump for joy.

What happened

Shares of mattress maker Tempur Sealy International (TPX 4.97%) plumped up on Thursday, rising 11.3% through 10:30 a.m. EST after the company reported estimate-crushing fourth-quarter earnings this morning.

Although analysts expected $0.52 per share in adjusted earnings on just $988 million in sales, Tempur Sealy instead said it earned $0.67 (both pro forma and GAAP) on sales of nearly $1.1 billion in the fourth quarter of 2020.  

Happy little girl bouncing on a mattress

Image source: Getty Images.

So what

Tempur Sealy's sales soared 21% year over year, while net earnings according to generally accepted accounting principles (GAAP) more than tripled over last year's $0.21. (Pro forma profits were up 90%.) Sales strength was worldwide, with revenue rising 21% in North America and 26% internationally.  

For the full-year fiscal 2020, Tempur Sealy said its sales climbed 18% to $3.7 billion, a record for the company. Earnings grew 91% to $1.64 per share.

Now what

And as good as all this news was, it could still get better.

Looking ahead to fiscal 2021, CEO Scott Thompson noted that he's seeing "a record level of unaided awareness and purchase intent for our brands" in North America, suggesting the company might be able to save on marketing spending. Thompson noted that COVID-19 restrictions could constrain sales in Europe early this year, but that segment of the company's business is so much smaller than the North American side that any slowdown there will probably resemble a rounding error.

Overall, management predicts sales will continue to grow 15% to 20% in the new year, with earnings ranging from $2.30 to $2.50 per share. When you consider that this level of profit would price the stock at only 13.6 times earnings, a 15% or better growth rate makes it easy to call this stock a buy.

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Stocks Mentioned

Tempur Sealy International, Inc. Stock Quote
Tempur Sealy International, Inc.
TPX
$25.97 (4.97%) $1.23

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