Tempur-Pedic International, the maker of premium mattresses and pillows, is down nearly 50% today after it cut its sales number in half. Analysts were expecting earnings of 86 cents per share and that’s now going to be around 36 cents per share. CEO Mark Sarvary said this cut in sales was do to new competition in the specialty space.
What’s comical though is how the downgrades and rating changes start coming in once the stocks is chopped in half. What happened to their over weights, market performs, out performs, and strong buys?
Amazingly, the stock went from $87 a share three months ago to around $22 a share today. The question is always, where were these analysts months and weeks ago? Aren’t they paid to have some insight into the mattress industry? Why weren’t they saying to sell when the stock reached nearly $90 a share?
“In light of Wednesday’s very disappointing downward guidance revision owing to heightened competitive pressures, and the likely need to increase promotion spending, we are downgrading the shares of TPX to Perform from Outperform and removing our prior $75 price target. We have limited visibility into even our markedly lowered estimates for this year and next, and expect the shares to remain depressed for some time.” (Benzinga)
The dismal outlook prompted KeyBanc analyst Bradley Thomas to cut his rating for Tempur-Pedic to “Hold” from “Buy,” saying that while mattress makers have gotten a boost from the pickup in consumer spending, the competition between them is worse than he thought. “While we feared expectations for the second quarter were too high, we were not expecting anything as dramatic as today’s announcement,” Thomas wrote in a note to investors.The analyst said that while he’s still optimistic that Tempur-Pedic can post long-term profit and sales growth, the increasing competitive environment will continue to scare away potential investors. (Yahoo Finance)
There were some analyst changes related to the stock prior to today’s huge sell off, about a month ago, on May 12th, these reports below came in. Yes, as you can see nobody said the stock would ended up trading for around $23 a share due to competition issues. And yes, Raymond James upgraded the stock to a STRONG BUY.
Raymond James upgraded the stock “market perform” rating to a “strong-buy” rating in a research note issued to investors on Thursday. A number of other analysts have also recently weighed in on TPX. Analysts at Piper Jaffray cut their price target on shares of Tempur-Pedic International from $100.00 to $95.00 in a research note to investors on Wednesday. Separately, analysts at Oppenheimer cut their price target on shares of Tempur-Pedic International from $90.00 to $75.00 in a research note to investors on Wednesday. They now have an “outperform” rating on the stock. Finally, analysts at Barclays Capital cut their price target on shares of Tempur-Pedic International from $85.00 to $63.00 in a research note to investors on Monday. They now have an “equal weight” rating on the stock. (LocalizedUSA)
The truth is, it’s probably the time to start building a position in Tempur-Pedic, if you believe they can fight off the competition in the coming months and years. Plus, when the stock is chopped down this much, it might get interesting as a buyout by another company. Heck, maybe Starbucks will purchase the mattress company so they can offer nap time in their cafes. They seem to be buying up everything else and people live in their cafes pretty much anyways.
Update: Well, look what happened to shares of Tempur-Pedic: they soared higher nearly 15% after the company announced they were buying back shares since the stock was hit so hard. The company has $200 million to spend on repurchases.