Wedbush Cuts Price Target on Tempur Sealy (TPX) to $55; Reiterates Neutral
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Wedbush maintained a Neutral rating on Tempur Sealy (NYSE: TPX), and cut the price target to $55.00 (from $71.00), following the company's investor conference. TPX reduced FY16 sales growth guidance by 4 percentage points at the midpoint to (1%)-(3%) from +lsd, and reduced FY16 EBITDA guidance by ~5% at the midpoint to $500-$525m from $525-$550m.
Analyst Seth Basham commented, "Ahead of an investor conference presentation yesterday AMC, TPX slashed FY16 guidance based primarily on lower than planned 3Q trends, particularly in August and September. TPX attributed its sales-driven shortfall to sluggish industry sales, tough competition from its largest competitor, and less effective advertising and promotions. Aligning with our cautious view of eroding sales of core Tempur-Pedic product lines, the 3Q shortfall came primarily in these lower-end memory foam products; we see these products most at risk from rising bed-in-box competition. Accounting for the positive ASP mix shift to better selling Breeze products, Tempur-Pedic unit sales likely declined double digits in 3Q, a sharp trend change vs. growth in the past nine quarters. The impact of high decremental margins on those lost unit sales could not be offset by numerous operational margin drivers, leading the company to reduce its EBITDA guidance by more than its sales growth guidance reduction. We cut our already below consensus estimates and reduce our target price to $55 (from $71); cyclical and secular pressures keep us NEUTRAL on TPX."
Shares of Tempur Sealy closed at $74.45 yesterday.
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