Yahoo Finance Why Is Legget & Platt (LEG) Down 2.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Legget & Platt (LEG). Shares have lost about 2.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Legget & Platt due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Leggett Q1 Earnings & Sales Beat, Margins Down Y/Y
Leggett & Platt, Inc. reported impressive first-quarter 2023 results. Both earnings and net sales surpassed the Zacks Consensus Estimate. Impressively, the top and bottom lines came ahead of the company’s expectations also.
However, both the metrics decreased on a year-over-year basis. The downtrend was caused by weak demand in residential end markets, dynamic macroeconomic and geopolitical environment pressure.
President and CEO of Leggett, Mitch Dolloff, said, "We delivered first quarter results that were above our expectations but lower than our record first quarter results last year. Operating results were largely in line with our expectations, but several expenses were lower than expected in the first quarter. Given continued demand volatility, our full year guidance range remains unchanged.”
Quarter in Detail
Leggett reported adjusted earnings of 39 cents per share, which beat the consensus estimate of 27 cents by 44.4%. Nonetheless, the bottom line decreased 49% from 66 cents reported a year ago.
Net trade sales of $1.21 billion topped the consensus mark of $1.2 billion by 0.9%. Yet, it declined 8% from the prior-year quarter’s levels of $1.32 billion.
Organically, sales were down 11% year over year. Raw-material-related selling prices ailed the results by 3%. Volume reduced sales by 7% due to continued demand softness in residential end markets partially offset by growth in the Automotive, Aerospace, and Hydraulic Cylinders businesses. Also, currency impacted sales by 1%. Acquisitions, net of small divestitures, contributed 3% to sales growth.
Adjusted EBIT declined 35.1% from the prior-year quarter’s levels to $89.3 million. The downside was due to lower volume and lower metal margin in the Steel Rod business.
Adjusted EBIT margin contracted 300 basis points (bps) to 7.4% from the year-ago quarter’s figure. Adjusted EBITDA margin also declined 280 bps to 11.1%.
Segment Details
Bedding Products: Net trade sales (excluding intersegment sales) decreased 17% from the year-ago quarter’s levels to $522.4 million. A 9% decline in volume was caused by softness in the U.S. bedding markets and lower demand in Steel Rod and Drawn Wire businesses.
Raw-material-related selling price and currency fluctuation impacted sales negatively by 7% and 1%, respectively. Organically, sales were down 17% year over year.
Adjusted EBIT margin fell 590 bps to 5.8%. Adjusted EBITDA margin contracted 510 bps year over year to 10.8%.
Specialized Products: Trade sales rose 21% from the prior-year quarter’s figure to $302.8 million. Volume increased by 11% across the segment.
A favorable selling price increased sales by 2% and Hydraulic Cylinders acquisition contributed 13%. Currency impact lowered sales by 5%. Organically, sales were up 8% year over year.
EBIT margin contracted by 300 bps to 8.7%. EBITDA margin plunged 330 bps year over year to 12.1%.
Furniture, Flooring & Textile Products: Trade sales declined 13% from the prior-year quarter’s level to $370.6 million. Volume was down 15% across the segment.
Raw-material-related selling price added 1% to sales. Currency impacted sales by 1%. Textiles acquisitions added 2% to the growth. Organically, sales were down 15% year over year.
EBIT margin of 8.8% was down 200 bps from the prior year. EBITDA margin also contracted 180 bps to 10.4%.
Financials
As of Mar 31, the company had $870 million in liquidity. It had $344.5 million of cash and equivalents at March 2023-end compared with $361.5 million at 2022-end.
Long-term debt was $2.11 billion, up 2% from $2.07 billion from 2022-end. The trailing 12-month net debt-to-adjusted EBITDA was 2.88x at first quarter-end compared with 2.32x in the year-ago period and 2.66x at 2022-end.
Cash from operations for the reported quarter totaled $96.7 million compared with $39 million in the prior year. Capital expenditures were $38 million in first quarter compared with $19 million in previous year.
2023 Guidance
Leggett expects sales in the range of $4.8–$5.2 billion, indicating a decline of 7% to growth of 1% year over year owing to low-single digit down volume. Raw-material-related price decrease and currency impact are likely to reduce sales by mid-single digits.
Sales are likely to be down low-single digit in the Bedding Products and Furniture, Flooring & Textile Products segments. Nonetheless, it is expected to be up-high single digit in Specialized Products. In 2023, acquisitions are expected to add nearly 3% to sales.
Earnings are projected to be between $1.50 and $1.90 per share due to lower metal margins in the Steel Rod business, lower volume in some businesses and moderate pricing pressure from deflation. LEG expects EBIT margin to be in the range of 7.5-8%.
Capital expenditures, depreciation and amortization costs, and operating cash flow are estimated to be $100-$130 million, $200 million and $450–500 million, respectively. Dividend and net interest expenses are likely to be $240 million and $85 million, respectively. Effective tax rate for the year is anticipated at 24%. Fully diluted shares are projected to be approximately 137 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -7.69% due to these changes.
VGM Scores
At this time, Legget & Platt has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Legget & Platt has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Leggett & Platt, Incorporated (LEG) : Free Stock Analysis Report
