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Leggett (LEG) Q2 Earnings Meet, Sales Miss, 2024 View Down
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Leggett & Platt, Incorporated (LEG - Free Report) reported lackluster results for second-quarter 2024. Earnings matched the analysts’ expectation while net sales missed the same. The metrics declined on a year-over-year basis due to persistent weak demand in most of the end markets served.
Following the results, the stock plunged 1.2% in the after-hour trading session on Aug 1.
For the full year, LEG lowered sales guidance and narrowed adjusted EPS guidance. The company noted that demand in the residential end markets remains weak as consumers continue to delay big-ticket, discretionary purchases. Also, the global automotive market remains volatile due to a slower-than-expected shift to electric vehicles and disruption from new Chinese market entrants.
President and CEO of Leggett, Karl Glassman, said, "We are currently conducting a strategic review of our diverse portfolio, assessing how each business fits into our long-term vision. This review, in addition to our restructuring plan and operational improvement initiatives, is leading to a clearer vision of the opportunities ahead.”
Quarter in Details
Leggett’s adjusted earnings per share (EPS) of 29 cents met the consensus estimate and decreased 23.7% from 38 cents reported a year ago.
Leggett & Platt, Incorporated Price, Consensus and EPS Surprise
Net trade sales of $1.129 billion missed the consensus mark of $1.134 billion by 0.5% and declined by 7.5% from the prior-year quarter’s level of $1.22 billion (all organic). Volume declined 4% due to continued demand softness in residential end markets and the earlier-than-expected loss of a customer in Specialty Foam. Raw material-related selling prices and currency impact lowered sales by 4%.
Adjusted EBIT declined 22.8% to $71 million from the prior-year quarter’s level of $92 million. The decline was due to lower volume, increased inventory write-downs/reserves, raw material-related pricing adjustments, metal margin compression, and higher bad debt reserves. This was partially offset by lower amortization expenses, operational efficiency improvements, and restructuring benefits.
Adjusted EBIT margin contracted 120 basis points (bps) to 6.3% from the year-ago quarter’s figure of 7.5%. Adjusted EBITDA margin also contracted 200 bps to 9.2% from the year-ago quarter.
Segmental Details
Bedding Products' (excluding intersegment sales) net trade sales decreased 13% (fully organic) from the year-ago quarter’s level to $438 million. A volume decline of 7% was caused by an earlier-than-expected loss of a customer and continued demand softness in the U.S. and European bedding markets partially offset by higher trade rod sales. Raw material-related selling price, net of currency benefit, reduced sales by 6%.
Adjusted EBIT margin contracted 430 bps to 0.1%. Adjusted EBITDA margin also contracted 610 bps year over year to 3.4%.
The Specialized Products segment's trade sales were flat (all organic) from the prior-year quarter’s figure to $320 million. Volume was flat as growth in Aerospace was offset by declines in Hydraulic Cylinders and Automotive. Raw material-related selling price increase was offset by currency translation impacts.
EBIT margin expanded 80 bps to 11.1% on the back of operational efficiency improvements partially offset by currency impact. EBITDA margin also grew 80 bps year over year to 14.3%.
Trade sales in the Furniture, Flooring & Textile Products segment declined 6% from the prior-year quarter’s level to $371 million. Volume was down 3%, mainly due to lower Geo Components and continued weakness in residential end markets. Raw material-related selling price decrease reduced sales by 3%.
Adjusted EBIT margin of 9.5% was up 40 bps from the prior year owing to pricing discipline and restructuring benefits. Adjusted EBITDA margin also improved 40 bps to 10.9%.
Financials
As of Jun 30, 2024, the company had $705 million in liquidity. It had cash and equivalents worth $307 million at the end of June, down from $365.5 million at 2023-end.
Long-term debt totaled $1.7 billion, up from $1.68 billion recorded at 2023-end. The trailing 12-month net debt-to-adjusted EBITDA was 3.83x compared with 3.16x at the end of 2023.
Cash from operations totaled $94 million in the reported quarter compared with $111 million in the prior-year period. Capital expenditures totaled $15 million in the second quarter versus $30 million a year ago.
2024 Guidance Updated
Leggett now expects sales in the range of $4.3-$4.5 billion versus the prior expectation of $4.35-$4.65 billion, indicating a 5-9% decline year over year. Volume is still expected to be down low to mid-single digits. Raw-material-related price decreases and currency impact are likely to reduce sales by low single digits.
Volume is likely to be down by high-single digits in the Bedding Products and down by low single-digit in Furniture, Flooring & Textile Products segments. Net sales are expected to be flat for Specialized Products. Earlier, LEG expected Specialized Products sales to be up in low single-digits.
Adjusted EPS expectation is narrowed to $1.10-$1.25 from $1.05-$1.35, down from $1.39 reported in 2023. This is due to lower expected volume in the Bedding Products and Furniture, Flooring & Textile Products segments, pricing responses related to global steel cost differentials and metal margin compression. This is partially offset by lower amortization resulting from the 2023 long-lived asset impairment.
LEG now expects adjusted EBIT margin in the range of 6.5-6.9% from 6.4-7.2% expected earlier. This reflects a decline from 7.1% reported a year ago.
Strategic Education, Inc. (STRA - Free Report) , or SEI, reported stellar results in second-quarter 2024. Its quarterly earnings and revenues topped the Zacks Consensus Estimate and increased year over year.
The quarterly results reflect solid growth across the company’s three reportable segments, attributable to continued enrollment growth in the U.S. Higher Education segment, especially employer-affiliated enrollments, and total enrollment improvement in the Australia/New Zealand segment. Moreover, the Education Technology Services segment portrayed solid performance, mainly driven by the growth in Sophia Learning subscriptions.
Hasbro, Inc. (HAS - Free Report) reported second-quarter fiscal 2024 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Despite a year-over-year revenue decline, earnings increased on the back of a favorable business mix and improved operations.
For the full year, HAS expects total adjusted EBITDA between $975 million and $1.025 billion compared with the prior prediction of $925 million and $1 billion.
Mattel, Inc. (MAT - Free Report) reported mixed second-quarter 2024 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top line missed the consensus estimate for the third straight quarter.
Mattel anticipates 2024 adjusted EPS between $1.35 and $1.45, compared with $1.23 in 2023. The Zacks Consensus Estimate for 2024 EPS is pegged at $1.40.
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Leggett (LEG) Q2 Earnings Meet, Sales Miss, 2024 View Down
Leggett & Platt, Incorporated (LEG - Free Report) reported lackluster results for second-quarter 2024. Earnings matched the analysts’ expectation while net sales missed the same. The metrics declined on a year-over-year basis due to persistent weak demand in most of the end markets served.
Following the results, the stock plunged 1.2% in the after-hour trading session on Aug 1.
For the full year, LEG lowered sales guidance and narrowed adjusted EPS guidance. The company noted that demand in the residential end markets remains weak as consumers continue to delay big-ticket, discretionary purchases. Also, the global automotive market remains volatile due to a slower-than-expected shift to electric vehicles and disruption from new Chinese market entrants.
President and CEO of Leggett, Karl Glassman, said, "We are currently conducting a strategic review of our diverse portfolio, assessing how each business fits into our long-term vision. This review, in addition to our restructuring plan and operational improvement initiatives, is leading to a clearer vision of the opportunities ahead.”
Quarter in Details
Leggett’s adjusted earnings per share (EPS) of 29 cents met the consensus estimate and decreased 23.7% from 38 cents reported a year ago.
Leggett & Platt, Incorporated Price, Consensus and EPS Surprise
Leggett & Platt, Incorporated price-consensus-eps-surprise-chart | Leggett & Platt, Incorporated Quote
Net trade sales of $1.129 billion missed the consensus mark of $1.134 billion by 0.5% and declined by 7.5% from the prior-year quarter’s level of $1.22 billion (all organic). Volume declined 4% due to continued demand softness in residential end markets and the earlier-than-expected loss of a customer in Specialty Foam. Raw material-related selling prices and currency impact lowered sales by 4%.
Adjusted EBIT declined 22.8% to $71 million from the prior-year quarter’s level of $92 million. The decline was due to lower volume, increased inventory write-downs/reserves, raw material-related pricing adjustments, metal margin compression, and higher bad debt reserves. This was partially offset by lower amortization expenses, operational efficiency improvements, and restructuring benefits.
Adjusted EBIT margin contracted 120 basis points (bps) to 6.3% from the year-ago quarter’s figure of 7.5%. Adjusted EBITDA margin also contracted 200 bps to 9.2% from the year-ago quarter.
Segmental Details
Bedding Products' (excluding intersegment sales) net trade sales decreased 13% (fully organic) from the year-ago quarter’s level to $438 million. A volume decline of 7% was caused by an earlier-than-expected loss of a customer and continued demand softness in the U.S. and European bedding markets partially offset by higher trade rod sales. Raw material-related selling price, net of currency benefit, reduced sales by 6%.
Adjusted EBIT margin contracted 430 bps to 0.1%. Adjusted EBITDA margin also contracted 610 bps year over year to 3.4%.
The Specialized Products segment's trade sales were flat (all organic) from the prior-year quarter’s figure to $320 million. Volume was flat as growth in Aerospace was offset by declines in Hydraulic Cylinders and Automotive. Raw material-related selling price increase was offset by currency translation impacts.
EBIT margin expanded 80 bps to 11.1% on the back of operational efficiency improvements partially offset by currency impact. EBITDA margin also grew 80 bps year over year to 14.3%.
Trade sales in the Furniture, Flooring & Textile Products segment declined 6% from the prior-year quarter’s level to $371 million. Volume was down 3%, mainly due to lower Geo Components and continued weakness in residential end markets. Raw material-related selling price decrease reduced sales by 3%.
Adjusted EBIT margin of 9.5% was up 40 bps from the prior year owing to pricing discipline and restructuring benefits. Adjusted EBITDA margin also improved 40 bps to 10.9%.
Financials
As of Jun 30, 2024, the company had $705 million in liquidity. It had cash and equivalents worth $307 million at the end of June, down from $365.5 million at 2023-end.
Long-term debt totaled $1.7 billion, up from $1.68 billion recorded at 2023-end. The trailing 12-month net debt-to-adjusted EBITDA was 3.83x compared with 3.16x at the end of 2023.
Cash from operations totaled $94 million in the reported quarter compared with $111 million in the prior-year period. Capital expenditures totaled $15 million in the second quarter versus $30 million a year ago.
2024 Guidance Updated
Leggett now expects sales in the range of $4.3-$4.5 billion versus the prior expectation of $4.35-$4.65 billion, indicating a 5-9% decline year over year. Volume is still expected to be down low to mid-single digits. Raw-material-related price decreases and currency impact are likely to reduce sales by low single digits.
Volume is likely to be down by high-single digits in the Bedding Products and down by low single-digit in Furniture, Flooring & Textile Products segments. Net sales are expected to be flat for Specialized Products. Earlier, LEG expected Specialized Products sales to be up in low single-digits.
Adjusted EPS expectation is narrowed to $1.10-$1.25 from $1.05-$1.35, down from $1.39 reported in 2023. This is due to lower expected volume in the Bedding Products and Furniture, Flooring & Textile Products segments, pricing responses related to global steel cost differentials and metal margin compression. This is partially offset by lower amortization resulting from the 2023 long-lived asset impairment.
LEG now expects adjusted EBIT margin in the range of 6.5-6.9% from 6.4-7.2% expected earlier. This reflects a decline from 7.1% reported a year ago.
Zacks Rank
Leggett currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Recent Consumer Discretionary Releases
Strategic Education, Inc. (STRA - Free Report) , or SEI, reported stellar results in second-quarter 2024. Its quarterly earnings and revenues topped the Zacks Consensus Estimate and increased year over year.
The quarterly results reflect solid growth across the company’s three reportable segments, attributable to continued enrollment growth in the U.S. Higher Education segment, especially employer-affiliated enrollments, and total enrollment improvement in the Australia/New Zealand segment. Moreover, the Education Technology Services segment portrayed solid performance, mainly driven by the growth in Sophia Learning subscriptions.
Hasbro, Inc. (HAS - Free Report) reported second-quarter fiscal 2024 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Despite a year-over-year revenue decline, earnings increased on the back of a favorable business mix and improved operations.
For the full year, HAS expects total adjusted EBITDA between $975 million and $1.025 billion compared with the prior prediction of $925 million and $1 billion.
Mattel, Inc. (MAT - Free Report) reported mixed second-quarter 2024 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top line missed the consensus estimate for the third straight quarter.
Mattel anticipates 2024 adjusted EPS between $1.35 and $1.45, compared with $1.23 in 2023. The Zacks Consensus Estimate for 2024 EPS is pegged at $1.40.