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Leggett's (LEG) Q3 Earnings Lag, Sales Top, EPS View Cut

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  • LEG

Leggett & Platt, Incorporated’s LEG shares fell 3.5% in the after-hours trading session, following the announcement of lackluster earnings for third-quarter 2021. The bottom line missed the Zacks Consensus Estimate and declined on a year-over-year basis. The decline was primarily due to lower EBIT and a higher tax rate.

Its chairman and CEO, Karl Glassman, said, "Leggett remains well-positioned, both competitively and financially, to capitalize on long-term opportunities in our various end markets. Our enduring long-term fundamentals give us confidence in our ability to continue creating long-term value for our shareholders."

Quarter in Details

Leggett reported adjusted earnings of 71 cents per share, which missed the consensus mark of 76 cents by 6.6% and fell 13.4% from the year-ago figure of 82 cents.

Leggett & Platt, Incorporated Price, Consensus and EPS Surprise

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

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

Net trade sales totaled $1.32 billion, surpassing the consensus mark of $1.30 billion by 1.5% and increasing 9% from the prior-year level. Organic sales were up 8% year over year. Of this growth, raw material-related selling price added 13% and currency accounted for 1%. Acquisitions, net of divestitures, contributed 1% to sales. Yet, volume decline of 6% due to supply chain constraints in Bedding and Automotive markets offset the positives.

Adjusted EBIT decreased 8% from the prior-year quarter to $144 million. The decline stemmed from lower volume, which offset metal margin expansion in the Steel Rod business. Adjusted EBIT margin also contracted 200 basis points (bps) to 10.9% from the year-ago figure. Adjusted EBITDA margin declined 230 bps to 14.5%.

Segment Details

Net trade sales in Bedding Products (excluding inter-segment sales) increased 13% from the year-ago level to $664.1 million. Volume decline of 8% was due to the challenges associated with chemical and labor availability in the U.S. bedding market and European demand returning to more normal seasonal levels. Increased prices contributed 19%, currency added 1%, and acquisitions — net of divestitures — increased sales by 1%.

Adjusted EBIT margin contracted 80 bps to 12.2%. Adjusted EBITDA margin also fell 120 bps year over year to 16.3%.

The Specialized Products segment's trade sales slipped 3% from the prior-year figure to $235.6 million. Sales in Automotive due to semiconductor shortages impacting global automotive production reduced to 7%. Positive currency and the small Aerospace acquisition added 3% and 1%, respectively, to sales.

Adjusted EBIT margin declined 550 bps to 9.5%. Adjusted EBITDA margin decreased 490 bps year over year.

Trade sales in the Furniture, Flooring & Textile Products segment jumped 12% from the prior-year level to $419.5 million, mainly due to a 13% rise in raw material-related selling price increase. Yet, the segment saw a 1% decline in volume owing to softness in Textiles and Flooring.

Adjusted EBIT margin of 9.8% was down 190 bps from the prior year. Adjusted EBITDA margin also declined 210 bps to 11.2%.

Financials

As of Sep 30, 2021, the company had $965 million in liquidity. It had $234.7 million of cash and cash equivalents at third quarter-end compared with $348.9 million at 2020-end.

Long-term debt at September-end was $1.77 billion, down 6% from 2020-end. Trailing 12-month debt-to-adjusted EBITDA was 2.41.

Cash from operations for the first nine months of 2021 totaled $80.4 million compared with $383.8 million in the corresponding year-ago period.

2021 Guidance Narrowed

Leggett has updated its full-year guidance owing to raw material-related price increase and lower expected volume in Automotive. The company now expects sales in the range of $5-$5.1 billion versus $4.9-$5.1 billion expected earlier. This indicates year-over-year growth of 17-19%. Raw material-related price increase, a 1% rise in acquisitions (net of divestitures) and mid-single digit volume growth are likely to boost sales.

Adjusted EPS is now expected between $2.70 and $2.80 (compared with $2.70 and $2.90 projected earlier). The company expects adjusted EBIT margin between 11.1% and 11.2% compared with prior anticipation of 11.4-11.6%.

Capital expenditures, depreciation and amortization costs, operating cash flow, dividend, and net interest expense for 2021 are estimated at $120 million, $190 million, $350 million, $220 million, and $75 million, respectively. The effective tax rate for the year is projected at 23%.

For the fourth quarter, it expects net sales within $1.26-$1.36 billion and earnings of 69-79 cents per share.

Zacks Rank

Leggett — which shares space with Masonite International Corporation DOOR, American Woodmark Corporation AMWD and WillScot Corporation WSC in the Furniture industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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