Wall Street's bargain store is currently full of overstocked shelves containing quite a few trashed blue chips. Whether you're looking for a financial stock like Fannie Mae (NYSE:FNM) or a pharmaceutical like Pfizer (NYSE:PFE), this market continues to favor value-minded investors patient enough to buy and hold for the long term. Recent third-quarter earnings from Leggett and Platt (NYSE:LEG) may have provided another such opportunity.
Leggett and Platt, a diverse manufacturer of many products including bedding, fixtures, and residential and office furniture, has seen its share price wither to two-year lows on concerns of inflated raw material and energy costs. However, as stated here, this antique is currently on sale.
In the third quarter, Leggett's earnings fell sharply -- which was pretty much expected, unfortunately. For the quarter, net earnings fell 32% to $0.28 per share, well below analysts' $0.32 expectation. However, record quarterly sales of $1.35 billion beat the expected $1.32 billion, as acquisitions aided growth.
So why is Leggett still worth a look after reporting such lackluster results?
The recent quarter showed Leggett's financial power. Operating cash fueled $40 million in capital projects, $33 million in stock buybacks, and another $7 million on acquisitions. And while the near future may remain bleak, Leggett is aggressively pursuing growth.
As previously announced in September, the company plans to consolidate, close, or divest underperforming operations. This should boost annual earnings by 10 to 12 cents per share. In addition, Leggett intends to offset higher manufacturing costs with product price increases. The company's also actively pursuing acquisitions; in October alone, Leggett announced six acquisitions that could add over $200 million in combined revenues.
Leggett's fourth-quarter results may be mixed if raw materials and energy costs remain high and consumer spending stays strong, as recently reported by the Commerce Department. I also wonder if Leggett's furnishing and bedding sales will get a boost from increasing home sales and the recent hurricanes. Recently, Aaron Rents (NYSE:RNT), which was severely affected by the hurricanes, suggested that, according to experience, business picks up three to six months after the devastation occurs, as consumers begin to purchase replacement furnishings.
With Leggett and Platt focusing on delivering growth for the future, investors currently shopping at the nickel-and-dime store could find its shares quite interesting.
Further high-value Foolishness:
Fannie Mae and Pfizer are Motley Fool Inside Value selections. Foolish value guru Philip Durell is always seeking outstanding value opportunities. See his latest picks and previous selections with a free 30-day trial subscription.
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Fool contributor M.D. Mitchell is down the street at the local junkyard looking for some good trash. He loves to furnish his portfolio with unrealized antiques. He owns Pfizer and Fannie Mae, but none of the other companies mentioned.
