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Monster Beverage Corporation Message Board

  • lekinsh01 lekinsh01 Jun 8, 2012 4:15 PM Flag

    Coming from TPX article...and pump

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    • here is article:
      Tempur-Pedic: hard landing
      High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.

      Just a month or two ago, shareholders in US mattress maker Tempur-Pedic must have felt they were floating on a cloud. The company’s stock price peaked at $87 in April, almost three times the level of two years before. But they were snoozing atop a bubble. It has now popped and investors have woken up screaming: the shares today are $25.
      For outsiders, it is easy to call a bubble in retrospect. When analysts who had been pushing the stock downgrade it after the price drops by three-quarters, it seems obvious that the euphoria had grown pretty thick before dissipating. Yes, Tempur-Pedic’s cut to revenue and profit targets on Wednesday, which precipitated the final leg of the collapse, was brutal. Prior estimates were for 2012 sales and earnings per share growth of 15 and 22 per cent, respectively. Citing increased competition for the company’s signature memory foam mattresses, management is now guiding to flat sales and a 15 per cent drop to EPS.
      Even so the share price collapse far exceeds the deterioration in the company’s fundaments. So yes, it was a bubble, but was it so obvious at the time? The stock was definitely pricey, trading at 22 times forward earnings in April. But until management said otherwise, sales growth actually looked fairly robust. Tempur-Pedic had also been a consistent grower, with a 10-year average annual sales growth rate of 20 per cent. Operating margins did look a bit peaky. They were higher in 2011 than in the good times of 2007 – though only by a small amount. Should it have been obvious that without patent protection on memory foam, competition had to have turned nasty? Certainly, the stock analysts whose job it is to research this sort of thing did not see it coming.
      It is enough to make one quit picking stocks, buy an index fund, and sleep like a baby.
      Email the Lex team in confidence at

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