Leggett & Platt (NYSE: LEG) reported Q3 EPS of $0.61, $0.10 worse than the analyst estimate of $0.71. Revenue for the quarter came in at $1.09 billion versus the consensus estimate of $1.1 billion.

CEO Comments

President and CEO Karl G. Glassman commented, "We are pleased with our 8% sales growth in the third quarter, reflecting strength in several businesses and raw material-related selling price increases. EBIT margin improved sequentially (from 11.0% in second quarter to 11.4% in third quarter) but declined slightly versus the prior year's adjusted[1] EBIT margin (from 11.6% to 11.4%). Our raw material cost increases have moderated but are still a headwind in several of our businesses, including Home Furniture, European Spring and Flooring Products.

"Demand continues to be strong in our U.S. Spring business, with Comfort Core® innerspring units up 22%. We also benefited from higher trade volume and improved metal margins in our Steel Rod business. Adjustable Bed sales were up 27%, however, earnings were negatively impacted by promotional activity and lower production rates as we reduced inventory. Automotive growth moderated to 4% in the quarter as vehicle production slowed, particularly in Europe and Asia. With our pipeline of awarded future programs, we continue to be confident in our expectations for strong long-term performance in this business.

"We are reducing our full year sales guidance to the low end of our prior range and now expect 2018 sales of approximately $4.25 billion. We are also reducing our 2018 EPS guidance to $2.40-$2.50 on lower than previously expected sales in Automotive, a pricing lag on raw material increases in our European Spring, Flooring Products and Fabric businesses, continued volume weakness in Home Furniture and European Spring, and promotional activity and lower overhead recovery in Adjustable Bed.

"Our financial base remains strong. We ended the quarter with $545 million available through our commercial paper program. We repatriated $50 million of offshore cash in the third quarter, bringing our year-to-date repatriated total to $173 million. We expect to repatriate approximately $275 million of cash for the full year. Net debt to net capital1 was 41%, slightly above our 30% ‑ 40% target range and our debt was 2.3 times our trailing 12-month adjusted1 EBITDA.

"Our decade-long goal of achieving Total Shareholder Return (TSR) that ranks within the top third of the S&P 500 over rolling three-year periods continues to be our main financial priority. While our recent performance has not met this target, we strongly believe our disciplined growth strategy and use of capital will continue to support achievement of our top-third goal over time."

GUIDANCE:

Leggett & Platt sees FY2018 EPS of $2.40-$2.50, versus the consensus of $2.61.

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