KeyBanc: 'We View the Somnigroup (SGI) Story as a Multi-Year Opportunity'

KeyBanc analyst Bradley B. Thomas reiterated an Overweight rating and $105.00 price target on Somnigroup (NYSE: SGI).

The analyst commented: "We view the SGI story as a multi-year opportunity for EPS to grow 20%+, supported by share gains, the optimization of Mattress Firm, and an industry recovery. On share gains, one of the most important opportunities for the Company is the share of floor and share of customer wallet at Mattress Firm. Recall, Mattress Firm (prior to SGI ownership) had historically supported other brands to keep its vendor base diversified, and at the time of the MFRM acquisition closing, Tempur-Pedic and Private Label represented ~44% of MFRM sales. In our conversations, we believe SGI’s assortment within Mattress Firm could reach 60% of sales on a relatively organic basis. SGI has already made significant progress on the increase in the balance of share, increasing penetration from 44% at the beginning of 2025 to mid50% by the end of 2025. The increase in share has led to a $60M benefit to adjusted EBITDA in 2025 and is expected to have an incremental $40M benefit in 2026. Interestingly, our analysis (see Figure 11) points to just four additional slots added for SGI’s brands, largely on the Sealy side, as the number of slots for SSB has declined. While SGI has not quantified the total share of wallet opportunity, as we have previously written, we believe this opportunity could potentially add an additional $300M-$400M in EBITDA over the next 5-10 years. Additionally, SGI remains on track to achieve “a minimum of $100M in annual run-rate synergies” in year three post-closing from the optimization of Mattress Firm and TempurPedic. Within this, SGI had previously expected 35% of the run rate synergies to come from logistics, 30% from product lifecycle management, 20% from sourcing, and 15% from manufacturing efficiencies. Over the LT, SGI also expects to improve advertising efficiency as Tempur and Mattress Firm align messaging. This represents incremental opportunity that is not included in SGI’s cost savings target. For 2025, SGI expects $15M in synergies in 2025 (up from $10M in 4Q24), followed by $50M in 2026, and $35M in 2027. We revise our estimates to reflect our expectations for 4Q and the outlook for SGI. As such, our 4Q, 2025, and 2026 EPS estimates move to $0.73, $2.71, and $3.30, respectively, from $0.72, $2.70 and $3.25, respectively. In addition, we introduce a 2027 EPS estimate of $4.10."

For an analyst ratings summary and ratings history on Somnigroup click here. For more ratings news on Somnigroup click here.

Shares of Somnigroup closed at $92.65 yesterday.

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