On Thursday, Piper Sandler reaffirmed its Overweight rating on Tempur Sealy (NYSE:TPX) International Inc. (NYSE: TPX) with a consistent price target of $65.00. Currently trading at $55.47, with analyst targets ranging from $55 to $67, the stock shows notable potential.
According to InvestingPro analysis, TPX maintains a GOOD overall financial health score, though it appears slightly overvalued at current levels. The firm projected that the stock has the potential to outperform over the next 12 to 24 months, suggesting a 50% upside within two years, regardless of the outcome of the upcoming court decision regarding Tempur Sealy's proposed acquisition of Mattress Firm.
The analyst noted that while the court's decision on the acquisition could influence the stock in the near term, Tempur Sealy's shares are expected to perform well over the longer term. With current earnings per share at $2.19 and a P/E ratio of 24.68, the company has demonstrated solid profitability. If the acquisition proceeds, it could substantially increase earnings per share (EPS) over the next three years.
Conversely, if the deal does not go through, the company might engage in significant share repurchases. Want deeper insights? InvestingPro offers comprehensive analysis with 7 additional ProTips about TPX's performance and outlook.
The firm's industry survey indicated that the mattress industry might have reached its lowest point and is on a rebound. In addition to the potential acquisition of Mattress Firm, Tempur Sealy is believed to have robust company-specific drivers that could contribute to its performance through 2025.
The court's decision on Tempur Sealy's proposed acquisition is anticipated within the next month. The outcome is awaited as it could have a notable impact on the company's strategy moving forward, whether it leads to the expected EPS accretion from the acquisition or triggers a buyback of shares.
In other recent news, Tempur Sealy International, Inc. reported a steady growth in its third-quarter earnings for 2024. The company announced a 2% increase in net sales to $1.3 billion and a 6% rise in adjusted EBITDA to $275 million. The GAAP EPS climbed 14% to $0.73, while the adjusted EPS grew 7% to $0.82, marking the strongest cash flow since Q3 2021.
Despite a challenging bedding market, Tempur Sealy is outperforming industry trends, with plans to launch a new Sealy Posturepedic collection and a national advertising campaign. Notably, international sales grew, especially in the UK and China. The company also provided updates on its debt position, future guidance, and the anticipated acquisition of Mattress Firm.
According to recent developments, the company expects high-single-digit unit volume declines in the U.S. bedding industry for Q4 2024. However, Tempur Sealy's adjusted EBITDA projection for 2024 is approximately $915 million, with capital expenditures at about $125 million. The Federal Court hearing for the Mattress Firm acquisition is scheduled for November 12, 2024.
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