Archive for February, 2012
Tempur-Pedic International (TPX)
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ShareBack on February 3rd, I highlighted TPX as a momentum stock due to its strong earnings momentum, fundamental growth, brand strength and new line of moderately priced beds that should appeal to a wide segment of consumers.
Since that time the stock has risen over 9% and is still gaining interest from analysts; recently receiving a Buy rating and upgraded target of $85 by Oppenheimer Analysts. After a 60 percent rise off of its lows in December, the question is whether Tempur-Pedic still has upside from here or if it’s due for a nap?
Recent Developments
Tempur-Pedic manufactures, markets and sells high-end beds made from a material that was originally manufactured to cushion NASA astronauts on their flights into space.
They operate in about 80 countries and continue to expand, with their emphasis being here in the US.
In my February 3rd momentum update, I noted the recent release of TPX’s ‘Tempur-Simplicity’ line, a lower cost line that doubles the size of their addressable market.
Since then the company held its 2012 Investor Day presentation on February 22nd, at which time executives offered investors and analysts quite a bit of information. I wanted to offer some of the details and highlights on what I was able to glean from the report.
The global mattress market is a 20 billion dollar a year industry and growing, with 6 billion in premium sales. The US represents roughly 6 billion of the total sales (both regular and premium) alone. Non-spring mattresses (Tempur type) represent about 30% of that total and are increasing. In fact, non-spring mattresses have been driving a large part of the growth in the past 3 years and Tempur is looking to capture that business.
In the US, Tempur-Pedic beds represent only 3% of the total marketplace, which means that 97% of the total market share goes to its competitors, but also implies that TPX has a large amount of business it can capture.
Tempur’s main focus is the US, but they are looking to expand their international segment over the next several years in addition to growing presence and sales here in North America. The CEO offered some very optimistic projections for growth over the next couple years. He based much of the projections on what he has delivered over the past 3 years since their last Investor’s Day and what he is experiencing in the market right now.
Back in 2009 the company projected sales of $2 billion with operating margin to be at 25% by 2014. In 2011 they were well ahead of those targets, earning $1.4 billion and already seeing operating margins at more than 24%. During this last call he upped the ante for TPX, now projecting Read more
How to Play the Texas Tea Momentum
By Jared A Levy, Zacks
In May 2008 a call from a major brokerage was heard round the world. It
was the “super spike” in the price of oil which called for prices to
dramatically increase from the $115 level to an unthinkable $150-$200 a
barrel. This call came from the same analyst that three years earlier
saw $100 barrel crude when sweet Texas tea was hovering close to $60.
The earlier call was also a somewhat unthinkable prospect.
Recently, we got another call from the same brokerage… just
a different analyst this time. The call isn’t quite the same,
but the idea is. Oil prices are expected to move higher. We will leave
the details of Iran or supply and demand out of this discussion and
focus on how we can best position our portfolio based on this move.
Of course you’ll need to agree with the basic thesis that oil
will be moving higher and have some faith in Goldman Sach’s and their
research.
Who Benefits?
The immediate thought of who benefits rests with Read more