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Leggett & Platt, Incorporated LEG shares plunged 8.6% on Oct 10 after the company lowered its expectations for 2022.
The company highlighted that the challenging global economic environment and consumer backdrop have been resulting in relatively weak demand in the U.S. bedding market. It has been cutting production in Rod and Wire businesses to reduce inventory, given the bedding demand environment and slowing market for steel.
Key Takeaways
Pandemic-related supply issues and channel-specific pressures have adversely impacted demand significantly for the Specialty Foam business. LEG has been witnessing lower demand for Specialty Foam, which along with operational inefficiencies, is creating hurdles.
Meanwhile, owing to geopolitical and macroeconomic disruptions in Europe, International Bedding has been experiencing lower demand. The home Furniture demand has softened significantly over the last few months, with slower consumer demand and excess inventory at retail.
The volume and cost recovery in Automotive has been improving in a slower-than-expected trend as supply chain and geopolitical impacts bring continued volatility.
Overall, owning to the above-mentioned headwinds, LEG now expects sales in the range of $5.1–$5.2 billion versus $5.2-$5.4 billion expected earlier. Earnings are now expected to be between $2.30 and 2.45 per share, down from a prior expectation of $2.65-$2.80. The company now expects an EBIT margin of 9.5-10% (versus the prior expectation of 10.5-10.7%). Cash from operations is expected to be between $400 and $450 million (versus the prior guidance of $550–$600 million).
Acquisitions
The company has been navigating these challenges by aligning costs, production levels, and inventory with demand. It has been evaluating near-term opportunities with customers, focusing on new product developments and expanding its existing businesses through acquisitions.
Leggett & Platt acquired a leading global manufacturer of hydraulic cylinders for heavy construction machinery in late August 2022. The acquired unit has manufacturing facilities in Eschwege, Germany and Ningbo, China and a distribution facility in Halifax, PA, with combined 2021 sales of approximately $65 million. Also, LEG acquired a converter of construction fabrics for the furniture and bedding industries in Shannon, MS, during the same month. On Oct 3, Leggett & Platt acquired a distributor of geo components located in Ottawa, Canada. Each of these Textile businesses has annual sales under $10 million.
Share Price
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