Leggett (LEG) Unveils Restructuring Plan, Withdraws Targets
Leggett & Platt, Incorporated’s LEG stock dipped 8.5% on Jan 16, after the company announced that it implemented a restructuring plan, mainly in its Bedding Products segment. The move will improve manufacturing and distribution efficiency, advance product strategy and further support customer needs in this evolving market.
However, the company has withdrawn its previously stated total shareholder return goal of 11–14% and long-term financial targets, including revenue growth, EBIT margin and dividend payout ratio.
Inside the Headlines
Leggett will continue to reshape the Bedding Products unit to focus more on innovative and higher-value content driven by customer and end-consumer needs. Also, it is planning to consolidate some of its existing 50 manufacturing and distribution facilities to just 30-35 locations.
This will support its ability to maintain sufficient manufacturing capacity in fewer, higher-output facilities to effectively serve its customers and better align with anticipated future market demand. Also, this move will allow LEG to integrate its specialty foam and innerspring capabilities while maintaining market-leading service and product quality levels and improving overall efficiency.
Impressively, these initiatives will enhance product capabilities and increase content at attractive price points, reduce costs and create shareholder value.
Meanwhile, in the Furniture, Flooring & Textile Products segment, it plans to consolidate a few production facilities in Home Furniture and Flooring Products to better align capacity with regional demand and drive operating efficiencies.
Financial Impacts
When fully implemented in late 2025, the plan is expected to reduce annual sales by approximately $100 million and generate $40-$50 million EBIT benefit on an annualized run-rate basis. Some of these benefits will began to realize in the second half of 2024. The company is likely to receive $60-$80 million of net cash proceeds from the sale of real estate by the end of 2025.
LEG expects to incur $65-$85 million in restructuring and related costs, including $30-$40 million in cash costs. In the first half of 2024, it expects to incur $20-$25 million of restructuring and related costs.
Apart from this, the company is impairing an estimated $450 million of long-lived assets (primarily intangibles) associated with acquisitions made in the Bedding Products segment last year. Owing to the continued weak demand and changing market dynamics, which have created disruption and financial instability for some of LEG’s customers, the company expects reduced sales and earnings going forward. Leggett & Platt is scheduled to release its fourth-quarter 2023 results on Feb 8.
Price Performance & Earnings Estimates
Shares of the company have declined 4% in the past three months compared with the Zacks Furniture industry’s 10.8% growth.
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Earnings estimates for 2024 of $1.37 per share indicate a 1.1% year-over-year decline. Its earnings missed analysts' expectations in three of the last four quarters and beat on one occasion, with an average of 3.9%.
Zacks Rank & Stocks to Consider
Currently, Leggett carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Virco Mfg. Corporation VIRC sports a Zacks Rank #1 (Strong Buy). VIRC has a trailing four-quarter earnings surprise of 188.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VIRC’s 2024 sales and earnings per share (EPS) indicates a rise of 15.7% and 32.4%, respectively, from the year-ago period’s levels.
American Public Education, Inc. APEI sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 23.2% on average.
The Zacks Consensus Estimate for APEI’s 2024 sales and EPS indicates a rise of 2.5% and 115.8%, respectively, from the year-ago period’s levels.
TAL Education Group TAL currently carries a Zacks Rank #2 (Buy).
Although the Zacks Consensus Estimate for fiscal 2024 earnings has deteriorated in the past 60 days to a loss of 7 cents, it reflects a 66.7% improvement from year ago period.
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Leggett & Platt, Incorporated (LEG) : Free Stock Analysis Report
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