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Leggett's Unit Teams Up With Plug and Play to Aid Innovation

Zacks Equity Research

Leggett & Platt Automotive (“LPA”), a division of Leggett & Platt, Incorporated LEG, teams up with Plug and Play to support the rapid innovation in the mobility sector.

Headquartered in Silicon Valley, Plug and Play is a global innovation platform. With more than 10,000 startups and 280 corporate partners, Plug and Play has developed accelerator programs in excess of 20 locations across the world.

LPA, under its Specialized Products segment, will provide advanced solutions for vehicle interiors. Also, it will help Plug and Play to boost innovation within the cabin of the vehicles. Moreover, with this partnership, LPA will gain opportunities to implement new ideas from various start-ups.

During the third quarter of 2018, its Specialized Products segment sales, which accounted for 23.2% of total net sales, grew 11.3% from a year ago to $253.5 million. Notably, sales volume in the segment was up 5% year over year, backed by Automotive and Aerospace business.

Moreover, Leggett remains focused on its long-term strategic plan. It has already achieved the first two parts of the plan that include divesture of low-performing businesses, as well as achieving improved margins and returns. The company is now working on the third part of the plan that targets to achieve top-line growth of 4-5% annually. This latest partnership may help the company to achieve the target in the near term.

Also, Leggett remains on track with its Total Shareholder Return (“TSR”) target that it expects to reach by 2020. The company’s operating targets for 2020 include generating revenues of $5 billion, EBIT margin of 13% and EPS of $3.50. Further, it expects these targets to be fueled by organic growth, which in turn is expected to be backed by strategic buyouts, given the absence of any non-recurring factors.

However, softness in the demand for Home Furniture and European Spring, raw material cost inflation and lower overhead recovery in Adjustable Bed pose concerns. Meanwhile, shares of Leggett have declined 21.4%, comparing favorably with the industry’s fall of 35.8% in the past year.

Zacks Rank & Stocks to Consider

Currently, Leggett carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corporation GLDD, Gates Industrial Corporation PLC GTES and Lennox International, Inc. LII, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Great Lakes’ earnings in 2018 are expected to increase 111%.

Gates Industrial has an expected earnings growth rate of 44.6% for 2018.

Lennox International has a projected earnings growth rate of 18.9% for 2018.

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