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Leggett (LEG) to Report Q4 Earnings: What's in the Offing?

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Leggett & Platt, Incorporated LEG is slated to release fourth-quarter 2020 results on Feb 8, after market close.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 14.3% but revenues missed the same by 4.8%. On a year-over-year basis, earnings grew 5.3% but revenues declined 3%.

Leggett’s earnings topped the consensus mark in the last four quarters, with the average being 29.9%.

However, the company has a dismal sales surprise history. It missed the consensus mark for sales in 11 of the last 14 quarters owing to lower deliveries across the business.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at 70 cents per share over the past 60 days. The estimated figure indicates a 2.9% increase from the year-ago earnings of 68 cents per share. Also, the consensus mark for revenues is $1.15 billion, suggesting 0.4% year-over-year growth.

Leggett & Platt, Incorporated Price and EPS Surprise

Leggett & Platt, Incorporated Price and EPS Surprise
Leggett & Platt, Incorporated Price and EPS Surprise

Leggett & Platt, Incorporated price-eps-surprise | Leggett & Platt, Incorporated Quote

Factors to Note

The company is expected to have registered modest earnings, given tepid sales growth in the fourth quarter. Although it is expected to have registered higher demand from residential end markets, challenges in Aerospace and Work Furniture may have remained. Overall, its exit from Fashion Bed and Drawn Wire, along with decline in demand in Adjustable bed, Hydraulic Cylinders, Aerospace and Work Furniture businesses will likely reflect on the company’s fourth-quarter results.

Meanwhile, Leggett has been suffering from lower volumes, reduced raw material-related selling price and currency headwinds over the last few quarters.

Although demand trends have been improving, higher input costs (like increased non-woven pricing and chemical costs) may have put some pressure on margins. That said, its focus on containment of fixed costs is expected to have somewhat offset the negatives.

The consensus estimate for Bedding Products’ net sales (accounting for 49% of total revenues) is pegged at $544 million, indicating a decrease from $590 million in the third quarter. Lower volume in Adjustable Bed and exited volume in Drawn Wire will likely reflect on sales performance.

For Specialized Products (comprising 20% of total revenues), the consensus estimate for the segment’s net sales is pegged at $255 million, indicating an improvement of 4.9% sequentially. Improvement in the Automotive business is expected to have benefited the segment revenues. However, weak demand in Aerospace and Hydraulic Cylinders is expected to have impacted the segment’s top line.

The consensus estimate for net sales from the Furniture, Flooring & Textile Products segment (comprising 31% of total revenues) is pegged at $355 million, indicating a 5.3% sequential decline. Weak hospitality sales are likely to have weighed on the segment’s revenues. Nonetheless, strong demand in Fabric Converting, Geo Textile Components and Home Furniture, and improvement in residential sales are expected to have partly offset the negatives.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Leggett this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Leggett currently carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some stocks from the Zacks Consumer Discretionary space that investors may consider, as our model shows that these have the right combination of elements to deliver an earnings beat this time around.

American Outdoor Brands, Inc. AOUT has an Earnings ESP of +15.15% and a Zacks Rank #1, at present.

Mohawk Industries, Inc. MHK has an Earnings ESP of +2.26% and a Zacks Rank of 3.

Mattel, Inc. MAT has an Earnings ESP of +9.29% and a Zacks Rank #3.

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