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It has been about a month since the last earnings report for Legget & Platt (LEG). Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Legget & Platt due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Leggett & Platt's (LEG) Q4 Earnings Beat Estimates
Leggett & Platt, Incorporated reported impressive fourth-quarter 2020 results, with the top and bottom lines beating the Zacks Consensus Estimate and increasing year over year.
Quarter in Details
For the fourth quarter, Leggett reported adjusted earnings of 76 cents per share, which beat the Zacks Consensus Estimate of 70 cents by 8.6%. Also, the figure increased 11.8% year over year owing to higher EBIT.
Total sales for the quarter came in at $1,182 million, which surpassed the consensus mark of $1,149 million by 2.9%. The top line also increased 3.2% on a year-over-year basis. The upside was primarily driven by a 3% rise in organic sales. For the quarter, volume increased 1% year over year owing to strong demand in residential end markets and Automotive. However, this was offset by weakness in Aerospace and Work Furniture. Nonetheless, rise in raw material-related selling price and currency benefits contributed 2% to fourth-quarter sales.
Adjusted EBIT margin expanded 50 basis points (bps) year over year to 12.7%, benefiting from fixed-cost reductions. Adjusted EBITDA margin also expanded 40 bps year over year to 16.8%.
For the fourth quarter, net trade sales in Bedding Products increased 3% year over year to $548.3 million. The upside was driven by higher demand in ECS and U.S. and European Spring, partially offset by lower volume in Adjustable Bed and exited volume in Drawn Wire. Adjusted EBIT margin increased 40 bps to 11.6%. Adjusted EBITDA margin also grew 20 bps year over year to 16.5%.
The Specialized Products segment's trade sales for the fourth quarter inched up 1% year over year to $273 million. Notably, currency boosted sales by 3% year over year. However, the company witnessed a 2% year-over-year decline in volumes due to weak demand in Aerospace, partially offset by growth in Automotive. Adjusted EBIT margin increased 70 bps year over year to 18.8%. Adjusted EBITDA margin also expanded 100 bps year over year to 23.1%.
For the quarter, trade sales in the Furniture, Flooring & Textile Products segment rose 5% year over year to $360.7 million. The upside was primarily driven by strong demand in Fabric Converting, Geo Components and Home Furniture. This was partially offset by weak demand in Work Furniture and Flooring Products' hospitality business. Notably, volumes increased 2% year over year. The Geo Components acquisition and currency benefits contributed 2% and 1%, respectively, to fourth-quarter segment sales. Meanwhile, adjusted EBIT margin increased 60 bps year over year to 9.6%. Adjusted EBITDA margin also expanded 60 bps year over year to 11.4%.
As of Dec 31, 2020, the company had $1.5 billion of liquidity, $349 million cash on hand and $1.2 billion available under the revolving credit facility.
Total debt at December-end was $2 billion. There are no significant maturities until August 2022.
The company’s board of directors announced a dividend of 40 cents per share. The dividend is payable on Apr 15, 2021, to shareholders of record at the close of business as of Mar 15.
Net revenues for 2020 came in at $4,280.2 million compared with $4,752.5 million in 2019.
Net cash flow from operating activities for 2020 came in at $602.6 million compared with $668 million in 2019.
In 2020, adjusted earnings per share (EPS) came in at $2.13 compared with $2.57 in the previous year.
For 2021, the company expects sales in the range of $4.6-$4.9 billion, which indicates 7-14% growth from prior-year levels. Notably, rise in raw material-related price and currency benefits are likely to boost sales.
EPS for 2021 is expected between $2.30 and $2.60. The company expects EBIT margin between 10.5% and 11%.
Meanwhile, capital expenditures, depreciation and amortization, and operating cash flow for 2021 are estimated at $150 million, $195 million and $450 million, respectively. Also, effective tax rate is concluded at 23%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -17.12% due to these changes.
At this time, Legget & Platt has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Legget & Platt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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