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Legget & Platt (LEG) Down 4.7% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Legget & Platt (LEG - Free Report) . Shares have lost about 4.7% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Leggett Q4 Earnings Top, Margins Fall on Economic Woes
Leggett & Platt, Incorporated reported tepid earnings for fourth-quarter 2021. The top and bottom lines surpassed the Zacks Consensus Estimate. On a year-over-year basis, earnings declined despite revenue growth. Despite strong raw material-related selling price and acquisitions, the company witnessed higher costs associated with supply chain issues, semiconductor and foam chemical shortages, labor constraints, and transportation challenges.
President and CEO of Leggett, Mitch Dolloff, said, "Despite these ongoing challenges, including inflation and a likely shift to tighter monetary policy, we expect continued improvement in 2022 as conditions gradually stabilize and growth continues in our businesses most negatively impacted by the pandemic.”
Quarter in Details
Leggett reported adjusted earnings of 77 cents per share, which topped the consensus mark of 73 cents by 5.5% but decreased 2.5% from the year-ago figure of 79 cents due to lower EBIT.
Net trade sales totaled $1.33 billion, surpassing the consensus mark of $1.29 billion by 3.4% and increasing 12.7% from the prior-year level. Organic sales were up 11% year over year. Of this growth, raw material-related selling price added 16% and acquisitions contributed 2% to sales. Yet, volume decline of 5% due to supply chain constraints in Bedding and Automotive markets, and softness in U.S. and European bedding markets offset the positives.
EBIT decreased 2% from the prior-year quarter to $152 million. The decline stemmed from lower volume, which offset metal margin expansion in the Steel Rod business and pricing discipline. EBIT margin also contracted 180 basis points (bps) to 11.4% from the year-ago figure. Adjusted EBITDA margin declined 240 bps to 14.9%.
Segment Details
Net trade sales in Bedding Products (excluding inter-segment sales) increased 18% from the year-ago level to $647.3 million. Volume decline of 10% was due to the challenges associated with chemical and labor availability in the U.S. bedding market and softness in U.S. and European demand. Increased prices contributed 25% and Kayfoam acquisitions — net of small divestitures — led to sales growth of 3%. Organically, sales grew 15% year over year. Adjusted EBIT margin contracted 100 bps to 10%. Adjusted EBITDA margin also fell 170 bps year over year to 7%.
The Specialized Products segment's trade sales slipped 3% from the prior-year figure to $264 million. Low sales in Automotive due to semiconductor shortages, impacting global automotive production, reduced volume by 7%. Favorable selling price and currency and the small Aerospace acquisition both added 1% to sales. Organically, sales fell 4% year over year. Adjusted EBIT margin declined 710 bps to 11.7%. Adjusted EBITDA margin decreased 780 bps year over year to 15.4%.
Trade sales in the Furniture, Flooring & Textile Products segment jumped 17% from the prior-year level to $421.6 million, mainly due to a 16% rise in raw material-related selling price increase and a 1% increase in volume. Volume rose on growth in Work Furniture, partially offset by a decline in Flooring and Textiles. Organically, sales rose 17% year over year. Adjusted EBIT margin of 10.8% was down 110 bps from the prior year. Adjusted EBITDA margin also declined 80 bps to 12.2%.
Financials
As of Dec 31, 2021, the company had $1.6 billion in liquidity. It had $361.7 million of cash and equivalents at 2021-end compared with $348.9 million at 2020-end. Long-term debt at December-end was $1.79 billion, down 3% from 2020-end. Trailing 12-month debt-to-adjusted EBITDA was 2.29.
Cash from operations for 2021 totaled $271.3 million compared with $602.6 million in 2020. The decline was mainly due to inflationary impacts and planned investments in inventory.
2021 Highlights
Net revenues for 2021 came in at $5.07 billion, up 19% from $4.28 billion in 2020. Adjusted earnings came in at $2.78 per share compared with $2.16 in the previous year. Adjusted EBIT increased 25% from the prior year to $568 million, backed by increased volume, higher metal margins and pricing discipline. Adjusted EBIT margin also improved 60 bps from the year-ago figure to 11.2%. Adjusted EBITDA margin declined 10 bps to 14.9%.
2022 Guidance
Leggett expects sales in the range of $5.3-$5.6 billion. This indicates year-over-year growth of 4-10%. Raw material-related price increase, a 1% rise in 2021 acquisitions and flat to up mid-single-digit volume growth are likely to boost sales. Earnings are now expected between $2.70 and $3.00 per share. The company expects EBIT margin between 10.5% and 11%.
Capital expenditures, depreciation and amortization costs, operating cash flow, dividend, and net interest expense for 2021 are estimated at $150 million, $200 million, $600 million, $230 million, and $80 million, respectively. The effective tax rate for the year is projected at 23%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -12.04% due to these changes.
VGM Scores
At this time, Legget & Platt has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. It's no surprise Legget & Platt has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Legget & Platt (LEG) Down 4.7% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Legget & Platt (LEG - Free Report) . Shares have lost about 4.7% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Leggett Q4 Earnings Top, Margins Fall on Economic Woes
Leggett & Platt, Incorporated reported tepid earnings for fourth-quarter 2021. The top and bottom lines surpassed the Zacks Consensus Estimate. On a year-over-year basis, earnings declined despite revenue growth. Despite strong raw material-related selling price and acquisitions, the company witnessed higher costs associated with supply chain issues, semiconductor and foam chemical shortages, labor constraints, and transportation challenges.
President and CEO of Leggett, Mitch Dolloff, said, "Despite these ongoing challenges, including inflation and a likely shift to tighter monetary policy, we expect continued improvement in 2022 as conditions gradually stabilize and growth continues in our businesses most negatively impacted by the pandemic.”
Quarter in Details
Leggett reported adjusted earnings of 77 cents per share, which topped the consensus mark of 73 cents by 5.5% but decreased 2.5% from the year-ago figure of 79 cents due to lower EBIT.
Net trade sales totaled $1.33 billion, surpassing the consensus mark of $1.29 billion by 3.4% and increasing 12.7% from the prior-year level. Organic sales were up 11% year over year. Of this growth, raw material-related selling price added 16% and acquisitions contributed 2% to sales. Yet, volume decline of 5% due to supply chain constraints in Bedding and Automotive markets, and softness in U.S. and European bedding markets offset the positives.
EBIT decreased 2% from the prior-year quarter to $152 million. The decline stemmed from lower volume, which offset metal margin expansion in the Steel Rod business and pricing discipline. EBIT margin also contracted 180 basis points (bps) to 11.4% from the year-ago figure. Adjusted EBITDA margin declined 240 bps to 14.9%.
Segment Details
Net trade sales in Bedding Products (excluding inter-segment sales) increased 18% from the year-ago level to $647.3 million. Volume decline of 10% was due to the challenges associated with chemical and labor availability in the U.S. bedding market and softness in U.S. and European demand. Increased prices contributed 25% and Kayfoam acquisitions — net of small divestitures — led to sales growth of 3%. Organically, sales grew 15% year over year. Adjusted EBIT margin contracted 100 bps to 10%. Adjusted EBITDA margin also fell 170 bps year over year to 7%.
The Specialized Products segment's trade sales slipped 3% from the prior-year figure to $264 million. Low sales in Automotive due to semiconductor shortages, impacting global automotive production, reduced volume by 7%. Favorable selling price and currency and the small Aerospace acquisition both added 1% to sales. Organically, sales fell 4% year over year. Adjusted EBIT margin declined 710 bps to 11.7%. Adjusted EBITDA margin decreased 780 bps year over year to 15.4%.
Trade sales in the Furniture, Flooring & Textile Products segment jumped 17% from the prior-year level to $421.6 million, mainly due to a 16% rise in raw material-related selling price increase and a 1% increase in volume. Volume rose on growth in Work Furniture, partially offset by a decline in Flooring and Textiles. Organically, sales rose 17% year over year. Adjusted EBIT margin of 10.8% was down 110 bps from the prior year. Adjusted EBITDA margin also declined 80 bps to 12.2%.
Financials
As of Dec 31, 2021, the company had $1.6 billion in liquidity. It had $361.7 million of cash and equivalents at 2021-end compared with $348.9 million at 2020-end. Long-term debt at December-end was $1.79 billion, down 3% from 2020-end. Trailing 12-month debt-to-adjusted EBITDA was 2.29.
Cash from operations for 2021 totaled $271.3 million compared with $602.6 million in 2020. The decline was mainly due to inflationary impacts and planned investments in inventory.
2021 Highlights
Net revenues for 2021 came in at $5.07 billion, up 19% from $4.28 billion in 2020. Adjusted earnings came in at $2.78 per share compared with $2.16 in the previous year. Adjusted EBIT increased 25% from the prior year to $568 million, backed by increased volume, higher metal margins and pricing discipline. Adjusted EBIT margin also improved 60 bps from the year-ago figure to 11.2%. Adjusted EBITDA margin declined 10 bps to 14.9%.
2022 Guidance
Leggett expects sales in the range of $5.3-$5.6 billion. This indicates year-over-year growth of 4-10%. Raw material-related price increase, a 1% rise in 2021 acquisitions and flat to up mid-single-digit volume growth are likely to boost sales. Earnings are now expected between $2.70 and $3.00 per share. The company expects EBIT margin between 10.5% and 11%.
Capital expenditures, depreciation and amortization costs, operating cash flow, dividend, and net interest expense for 2021 are estimated at $150 million, $200 million, $600 million, $230 million, and $80 million, respectively. The effective tax rate for the year is projected at 23%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -12.04% due to these changes.
VGM Scores
At this time, Legget & Platt has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. It's no surprise Legget & Platt has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.