KeyBanc Remains Extremely Bullish on Mattress Firms, Raises Price Targets (MFRM) (TPX) (ZZ) (SCSS)

January 31, 2012 12:23 PM EST Send to a Friend
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Price: $60.63 -0.35%

Rating Summary:
    10 Buy, 2 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 29 | Down: 28 | New: 24
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Following meeting with management teams from Mattress Firm Holding (Nasdaq: MFRM), Tempur-Pedic International Inc. (NYSE: TPX), and Sealy Corporation (NYSE: ZZ) at the World Market Conference in Las Vegas, the mattress industry remains KeyBanc’s favorite subsector.

The firm notes the industry’s dynamics remain solid at this time and believes that new product launches and advertising will drive strong sales growth in 2012.

For Tempur-Pedic, the firm continues to feel the company’s “outlook remains bright” and still anticipates it’s new Simplicity line will grow sales by 25-35 percent. KeyBanc is reaffirming its Buy rating on shares of TPX while raising its price target from $73 to $83.

Sealy’s push of new products is helping the company gain market share. The firm remains optimistic with this movement, but is maintaining its Hold rating at this time.

KeyBanc sees Matress Firm’s push into new markets as a strategic move which will payout over time. The company announced 67 percent of its new stores will be implemented into existing markets while 33 percent are built in new markets. To go inline with the company’s outlook and their reaffirmed bullish model, KeyBanc raised its Q1 and FY12 EPS estimates from $0.18 and $1.17 to $0.20 and $1.23. The firm also raised its FY13 estimate from $1.44 to $1.55. KeyBanc is reiterating its Buy rating as it raises its price target from $32 to $36.

The firm toured a free-standing Select Comfort (Nasdaq: SCSS) with a district manager and states it was impressed with its new m7 line. The company remains one of KeyBanc’s favorite ideas as unit growth is predicted to average 5-7 percent for the beginning of 2012. The company has made a number of improvements since the economic collapses which will continue to payout for some time. KeyBanc has reiterated its Buy rating on the stock and has increased its price target from $28 to $30.


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