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Tempur Sealy- A Bedding Buy

Tempur Sealy International (TPX) develops, manufactures and markets mattresses, foundations, pillows and other bedding products, notes Tom Bishop, editor of BI Research.

The company’s brand portfolio includes many highly recognized brands including Tempur, Tempur-Pedic, Sealy (Posturpedic) and Sterns & Foster.

More from Tom Bishop: Small Cap Expert Sleeps well with Tempur Sealy

The company reported record full year results on 2/13 that were pretty impressive for a mattress company! For example, Q4 net sales grew 29% to $871 million, including an increase of 36.3% in North America and a 4% increase in international sales on a constant currency basis. EPS did even better, soaring 52% to $1.37.

For the full year the company posted a 35% increase in adjusted EPS to $4.01 on revenues of $3.11 billion. In North America the direct channel (its company-owned stores) nearly doubled and grew almost 30% excluding acquired stores.

The company currently has 57 Tempur retail stores and plans to add another 20 in 2020, ultimately targeting 125 to 150. These owned stores carry higher margins as compared to its wholesale business where it has newly added customers like Mattress Firm and Big Lots.

During 2019 the Company acquired Sleep Outfitters and in January acquired an 80% interest in Sherwood Bedding whose annual revenues are over $150 million. And the Company remains acquisitive. Also the Company is buying back about $50 million of its stock each quarter. This has all helped to drive the stellar 2019 results.

And 2020 is expected to be no slouch either. The latest consensus calls for EPS to grow 39% in 2020 to $5.58 on a near 20% increase in revenue to $3.6 - $3.7 billion. And by the way the company beat estimates in each of the prior 4 quarters by double digit percentages.

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Meanwhile, many of these beds are getting pretty high tech with various methods of temperature control and the ability to elevate one side of the bed if there’s some snoring going on ... and even for the bed to detect that on its own! Hey, you spend a third of your life there, make it great. The stock remains a buy.

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