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Manufacturing company Leggett & Platt (NYSE:LEG) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 7.6% year on year to $1.13 billion. On the other hand, the company's full-year revenue guidance of $4.4 billion at the midpoint came in slightly below analysts' estimates. It made a non-GAAP profit of $0.29 per share, down from its profit of $0.38 per share in the same quarter last year.
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Leggett & Platt (LEG) Q2 CY2024 Highlights:
- Revenue: $1.13 billion vs analyst estimates of $1.13 billion (small miss)
- EPS (non-GAAP): $0.29 vs analyst expectations of $0.30 (1.7% miss)
- The company dropped its revenue guidance for the full year from $4.5 billion to $4.4 billion at the midpoint, a 2.2% decrease
- EPS (non-GAAP) guidance for the full year was lowered from $1.20 at the midpoint to $1.18
- Gross Margin (GAAP): 16.5%, down from 18.1% in the same quarter last year
- Free Cash Flow of $78.5 million is up from -$32 million in the previous quarter
- Market Capitalization: $1.77 billion
Founded in 1883, Leggett & Platt (NYSE:LEG) is a diversified manufacturer making products for various industries.
Home FurnishingsA healthy housing market is good for furniture demand as more consumers are buying, renting, moving, and renovating. On the other hand, periods of economic weakness or high interest rates discourage home sales and can squelch demand. In addition, home furnishing companies must contend with shifting consumer preferences such as the growing propensity to buy goods online, including big things like mattresses and sofas that were once thought to be immune from e-commerce competition.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Leggett & Platt's demand was weak over the last five years as its sales were flat, a poor baseline for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Leggett & Platt's recent history shows its demand has stayed suppressed as its revenue has declined by 7.8% annually over the last two years.
Leggett & Platt also breaks out the revenue for its three most important segments: Bedding, FF&T, and Specialized Products, which are 38.8%, 32.9%, and 28.3% of revenue. Over the last two years, Leggett & Platt's Bedding (mattresses and foundations) and FF&T (sofa parts and tiles ) revenues averaged year-on-year declines of 15.8% and 8.9% while its Specialized Products revenue (automobile components) averaged 12% growth.
This quarter, Leggett & Platt reported a rather uninspiring 7.6% year-on-year revenue decline to $1.13 billion of revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Leggett & Platt has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.2%, subpar for a consumer discretionary business.
Leggett & Platt's free cash flow clocked in at $78.5 million in Q2, equivalent to a 7% margin. This quarter's cash profitability was in line with the comparable period last year and its two-year average.
Key Takeaways from Leggett & Platt's Q2 Results We struggled to find many positives in these results. Its revenue and EPS missed analysts' estimates due to underperformance in its Bedding segment, and it lowered its full-year revenue and EPS guidance. Overall, this was a bad quarter for Leggett & Platt. The stock remained flat at $12.80 immediately following the results.
