Commercialization of technologies developed for the space program has led to a wide variety of interesting and useful products. Among them are the well-publicized offerings of a firm headquartered in Lexington, Kentucky.
Tempur-Pedic International (NYSE: TPX) makes bedding materials, featuring a visco-elastic foam that was designed by NASA to help cushion astronauts during liftoff. Offerings include pillows, mattresses, adjustable beds and cushions. The company markets its products through furniture and department stores, medical retailers, hospitals and the Internet. They are sold under the brand names TEMPUR and Tempur-Pedic. About a third of Tempur-Pedic's revenue comes from international sales.
The company pleased investors last week when it reported Q2 EPS of 39 cents and revenues of $257.6 million. Analysts
had been looking for 35 cents and $244 million. Management also guided FY07 EPS to $1.63-$1.66 ($1.56 consensus) and FY07 revenues to $1.065-$1.085 billion ($1.06B consensus). The CEO cited Q1 price increases and additional moves planned for Q3, in discussing the good results and favorable outlook. The company also announced a new $200 million share buyback. The stock popped on the news and is now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the stock with three "buys" and ten "holds." Analysts see an 18% growth rate, through the next year. The TPX Sales Growth rate (17.65%), Operating Margin (20.90%), Return on Assets (15.75%), Return on Investment (19.65%) and Return on Equity (61.87%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $15.52 and $33.57. A stop-loss of $27.50 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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Reader Comments (Page 1 of 1)
7-25-2007 @ 2:17PM
Trent said...
I like this one too. My latest comments:
I am going to nit-pick here, and point out that most of the guidance increase appears to be due to the lower tax rate (and is thus non-operational.) Still, even accounting for this the midpoint of the new guidance is above the high end of the old guidance. Analysts right in the middle of the guidance range, so they will have some raising to do.
Cash from operations declined year/year, mostly due to rising inventories. Normally I would be more concerned about this, but the company had to make up for recent shortages (nice problem to have.) All in all, it was a good report from a company that is on a roll.